Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — AGRICULTURE, FISHERIES AND FOOD

Wood Pigeons (Control)

Mr. A. Henderson: asked the Minister of Agriculture, Fisheries and Food whether he has now assessed the effectiveness of the use of narcotic baits for the purpose of controlling wood pigeons; and whether he will make a statement.

The Joint Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. James Scott-Hopkins): I would refer the right hon. and learned Member to my reply on 27th March to my hon. Friend the Member for Harborough (Mr. Farr).

Mr. Henderson: Did not the Minister say in that reply that the inquiries were not complete, and did not he suggest that a further statement would have to be made? Are we to take it that the

inquiries into the effects of using this type of poison are still not complete? May we expect a statement in due course?

Mr. Scott-Hopkins: I said that the inquiries were not complete, in that the experiment; had to he curtailed because of the hard weather, and further experiments might be necessary to complete the inquiries at a later stage during the coming year.

Mr. Henderson: Are we to understand that the Ministry will undertake further experiments and that, meanwhile, it is satisfied that no danger to other forms of bird life arises from the use of this poison?

Mr. Scott-Hopkins: It is more than probable that further experiments will have to be, conducted this coming year owing to the bad weather which curtailed the last ones.

Sheep (Export to Africa)

Mr. Gibson-Watt: asked the Minister of Agriculture, Fisheries and Food how many sheep have been exported on the hoof to Africa for sacrificial purposes at religious festivals over the last twelve months.

Mr. Scott-Hopkins: So far as I am aware, there has been only one consignment consisting of 879 sheep.

Mr. Gibson-Watt: Can my hon. Friend say from tile information which he has been able to get whether this form of traffic will increase or decrease?

Mr. Scott-Hopkins: I see no reason why there should be any increase in this traffic.

Whales

Mr. Wingfield Digby: asked the Minister of Agriculture, Fisheries and Food whether he is aware that in the 1962–63 Antarctic whaling season British, Norwegian, Russian and Dutch whalers were unable to catch their allotted quotas, owing to the serious decline in whales; and what steps he is taking to secure a new international agreement to curtail quotas before some kinds of whale become entinct or severely reduced.

The Minister of Agriculture, Fisheries and Food (Mr. Christopher Soames): The total catch of whales in Antarctic waters is regulated by the international Whaling Commission. This meets at the beginning of July, and will consider measures to improve the serious situation to which the hon. Member refers. Her Majesty's Government will play a full part in its deliberations.

Mr. Digby: May we be assured that my right hon. Friend will do everything he can to prevent these depredations from reducing the breeding stock to below the danger level, which is now becoming quite a possibility?

Mr. Soames: Conservation must obviously be a most important feature in the forthcoming discussions, especially in view of the serious situation of the whale population as a whole. My hon. Friend will be aware that we have 5 per cent. of the total quota, but we will do our best in these discussions to express our views to all the countries concerned.

Swine Fever

Mr. Hilton: asked the Minister of Agriculture, Fisheries and Food how many pig herds were slaughtered as a result of swine fever during the past six months; how many pigs were involved; how much was paid in compensation; and what percentage of these herds had been vaccinated.

Mr. Scott-Hopkins: Since the introduction of the swine fever slaughter policy on 11th March this year 510 herds, comprising some 94,500 pigs, had, by the end of April, been slaughtered on account of the disease; compensation is estimated

at £1,180,000. Seven of the herds were registered vaccinated herds; other herds contained vaccinated pigs in varying numbers but detailed information about these is not available.
Small numbers of pigs have also been slaughtered, both before and after the change in policy, to assist in the diagnosis of the disease; 180 pigs have been slaughtered for this purpose during the past six months at a cost in compensation of approximately £1,000.

Mr. Hilton: Will the Parliamentary Secretary agree that, in some areas at least, swine fever has become a really serious problem? Is he aware that, because of restrictions, the Norwich cattle market is experiencing serious difficulties as a result of swine fever? Should not a great deal of money be devoted to research into the cause of this disease, because opinion on whether to vaccinate or not to vaccinate appears to be divided? Will the hon. Gentleman pay more attention to this and give farmers a definite opinion on whether they should or should not vaccinate?

Mr. Scott-Hopkins: I accept what the hon. Gentleman says about the seriousness of the disease. The slaughter policy was brought in to try to eradicate it. I am sure that the hon. Gentleman will agree that this is the right policy to pursue. We will be reviewing the question of vaccination in the light of our experience in the coming months.

Fowl Pest, Norfolk (Compensation Payments)

Mr. Hilton: asked the Minister of Agriculture, Fisheries and Food how much was paid in compensation to poultry keepers in Norfolk arising from fowl pest during each of the last four financial years.

Mr. Scott-Hopkins: In the 1962–63 financial year, the amount of compensation payable to poultry keepers in Norfolk was £2,170,000. In the three financial years immediately preceding compensation amounted to £1,091,000, £1,206,000 and £1,009,000.

Mr. Hilton: Does not the Parliamentary Secretary agree that this was a lot of money to pay in compensation for this disease? Can he give any idea


as to the success of vaccination against fowl pest? Are more people availing themselves of the opportunity of taking up the cheap vaccine, and, if not, will he try to spread abroad the advantage of vaccination against this disease?

Mr. Scott-Hopkins: I agree with the hon. Gentleman that a lot of money was spent, but he will realise that the compensation was for those healthy birds which were slaughtered during the eradication procedure. Concerning the vaccination policy, I am glad to say that in his county 60 per cent. of the poultry has been covered, but, of course, it is not anything like as much as one would want. We are doing what we can to get 80 per cent. coverage throughout the country.

Sir A. Hurd: Can the Parliamentary Secretary say how the Norfolk figure of 60 per cent. compares with the figures for the country as a whole? Was not the objective 85 per cent.?

Mr. Scott-Hopkins: The figure of 60 per cent. on comparative figures is good, but one wants to have 85 per cent. throughout the country before one can be satisfied that this new vaccine has been given a chance to operate successfully.

Mr. Bence: In view of the high amount paid in compensation, is the hon. Gentleman making inquiries and investigation to see that hygienic condition; are maintained in poultry keeping?

Mr. Scott-Hopkins: The hon. Gentleman will realise that the compensation figures I referred to were when we were having a slaughter policy, which has now ceased. We are now subsidising to a certain extent vaccine for poultry keepers.

Agricultural Support

Mr. Hooson: asked the Minister of Agriculture, Fisheries and Food what consideration he is giving to the need for far reaching reform of the agricultural support system in order to provide a managed market for both home production and imports from the European Free Trade Association, the Commonwealth and other areas.

Mr. Peart: asked the Minister of Agriculture, Fisheries and Food if he will

make a statement on the conclusions of his recent discussions with representatives of the agree cultural industry.

Mr. Harold Davies: asked the Minister of Agriculture, Fisheries and Food what decision he has now reached about the Future position of British agriculture in relationship to the European Economic Community and the General Agreement on Tariffs and Trade.

Mr. Soames: Our present system of agricultural support is basically sound but needs to be adapted to the conditions of today, particularly in order to bring greater stability to our market prices. As we said in this year's Annual Review White Paper, the Government will be discussing its proposals with the leaders of the agricultural industry and with Commonwealth and other overseas suppliers. For the latter purpose we shall take advantage of the various international meetings which are beginning this month.
I will inform the House about the general lines of our proposals as soon as I am in a position to do so.

Mr. Hooson: In view of that Answer. may we take it that the Minister is still an advocate of the managed market as he was before the breakdown of the Common Market negotiations?

Mr. Soames: During the Common Market negotiations I was explaining to our farmers that the managed market was perfectly capable of providing adequate returns for the agricultural industry. That is quite different in the context of the Common Market, on the one hand, and the context of this country not being a member of the Common Market, or, the other.

Mr. Peart: Will the right hon. Gentleman not Le wooed by Liberal concepts and the Liberal Party in the sphere of agriculture? Is he not aware that it has been state) already that the producers and the Minister have agreed in principle as a result of conversations at Ministry level? Wi11 he confirm this? Will he indicate which organisations in the industry will be consulted on policy? Will it be only the farmers' unions or will it include the agricultural workers' union, corn merchants and other people representing consumer interests? Will the right hon. Gentleman make a statement now?

Mr. Soames: I am not in a position to make any further statement today. As I said in my Answer, I shall inform the House about the general lines as soon as I am in a position to do so. Of course, the Government must reserve the right to have what conversations they feel right in home interests.

Sir H. Harrison: Will my hon. Friend bear in mind during these talks that a very large body of opinion in agricultural circles in this country favours, in changed world conditions, import controls and regulation by duty or quotas, and that this would be very much in line with traditional Conservative policy?

Mr. Soames: I am aware of the interest to which the hon. Gentleman refers.

Beef

Mr. Wingfield Digby: asked the Minister of Agriculture, Fisheries and Food the ratio between the quantities of imports of Argentine beef and homegrown beef marketed in the first three months of 1959, 1960 and 1961, respectively.

Mr. Soames: In the first quarter of these three years, Argentine imports were equivalent respectively to 22 per cent., 30 per cent. and 22 per cent. of home production.

Mr. Digby: Does my right hon. Friend agree that it is perfectly possible to phase these imports from the Southern Hemisphere, which are fed on natural pasture, with our own, and cannot he come to an agreement with the Argentine Government whereby stability is reached in the future, such as in these three years?

Mr. Soames: I think that we have made a considerable step forward in the arrangements that we have made with the Argentine recently.

Mr. C. Royle: Will the right hon. Gentleman clear up a difficulty which seems to arise from Press reports? On Tuesday last it was reported that the right hon. Gentleman had entered into agreement with the Argentine to reduce the amount of meat coming into this country from there, and on Thursday a report appeared in the Press that the Argentine were refusing to reduce the

amount of meat coming to Britain. Which is the truth?

Mr. Soames: This is not a matter of increasing or reducing. I can assure the hon. Gentleman that the Argentine Government informed Her Majesty's Ambassador in Buenos Aires on 27th April that in 1963 beef exports would be limited to 203,500 tons, which had been put to them during the negotiations. One must bear in mind in that context the quantities that have already been imported in the first quarter of this year. It is true that the Argentine Government placed on record their opposition to any unilateral restrictions on their export trade, but they agreed that the stability of the London market was in the mutual interest of both countries and that co-ordination of shipments as arranged was therefore desirable.

Sir A. Hurd: asked the Minister of Agriculture, Fisheries and Food what is the expected level of imports of beef from 1st April to the end of the year compared with the same period in 1962; and what forecast he has made of total supplies, including home production, compared with last year.

Mr. Soames: I estimate that beef imports in the last nine months of this year will be lower than in the corresponding period of 1962 and I would expect total beef supplies on our market, including home production, also to be somewhat lower.

Sir A. Hurd: asked the Minister of Agriculture, Fisheries and Food if, in order to restore and maintain confidence in the stability of the beef market, he will state the amount of beef expected to be imported in May, and publish similar forward estimates month by month.

Mr. Soames: Shipping schedules of chilled and frozen meat from Commonwealth and South American countries show that forecast arrivals of chilled beef in the four weeks ending 31st May are likely to be 16·8 thousand tons. A weekly summary of these forecast arrivals for up to six weeks ahead is available and can be obtained from my Department.

Sir A. Hurd: Would it not be helpful in providing rather better market intelligence if these forecasts could be published either by my right hon. Friend's


Ministry or through some other authentic organisation so that everybody concerned in the meat trade could know what is coming from abroad?

Mr. Soames: They are available to the trade Press. Indeed, they are figures originating from the trade, but they are, of course, available to any other organ of the Press which chooses to make use of them.

Mr. C. Royle: Could the right hon. Gentleman give an assurance that the Government have no idea in mind of very severe restrictions on imported meat? The need of the consumer has to be remembered in all these matters. If the right hon. Gentleman would give that assurance it would give a lot of satisfaction.

Mr. Soames: Of course, in our deliberations we will be bearing in mind striking the proper balance, as we believe, between the interests of the producer and of the consumer and of the taxpayer.

Mr. Bullard: asked the Minister of Agriculture, Fisheries and Food how the limiting figure of 203,000 tons of Argentine beef to be imported in 1963 compares with the figures for 1960, 1961, and 1962, respectively.

Mr. Soames: Imports of beef from the Argentine during 1960, 1961 and 1962, were 203,000 tons, 153,000 tons and 181,000 tons, respectively.

Mr. Bullard: Am I right in assuming that these figures indicate that this is not really a considerable reduction on previous years? Will my right hon. Friend give an assurance about the Press reports received from the Argentine last week about the discussions? Is it the case that a reduction in the figures has been secured by the Argentine having reached the end of the quantities it wished to shift? Has there been any curtailment of the amounts which would otherwise have come had there been no agreement?

Mr. Soames: The important point is that the right quantity should be coming to the market during the remaining nine months of the year. Taking into consideration that 76,000 tons came on to the market during the first quarter of this year, the total of 203,500 tons for the year is a satisfactory level.

Mr. Hilton: Will the right hon. Gentleman make sure that in future we do not have too many imports at a time when our farmer, are able to produce plenty'?

Mr. Soames: Under our present arrangements there is a guaranteed price for farmers and also virtually unrestricted imports from foreign sources.

Mr. Hooson: Has any proposal been made to the Argentine Government that its exports of beef to this country should be phased to occur largely during the months when supplies from our home producers are short?

Mr. Soames: The phasing of supplies is important but one can take it that Where a country sends more than a certain quantity of a commodity to a market it is in its own interests to phase those supplies so as to get the best return possible.

Price Review (N.F.U. Representations)

Mr. Barnett: asked the Minister of Agriculture', Fisheries and Food what representations he has received from county branches of the National Farmers' Union about the Annual Farm Price Review and what action he proposes to take in consequence.

Mr. Soames: A number of county branches have passed resolutions about the recent Annual Farm Price Review. While noire have been sent to my officials, a number of hon. Members have written to me sending me the views they have received from their county branches and I am replying to their letters.

Mr. Barnett: Is the Minister aware that these resolutions reflect very serious concern throughout the agricultural industry as a result of this Review, and that Bedfordshire and Dorset in particular have passed motions of no confidence in the Government's agricultural policy? Will he make available in the Library of the House of Commons a copy of the statement which, I believe, has been sent to him and which contains the views expressed by branches of the National Farmers' Union on this question?

Mr. Soames: I am, of course, aware that representations have been arranged. This is not the first Review at which


farmers have made representations, following its publication, that in their view there should have been a different outcome. This was a disagreed Review, and it is natural that this should be reflected in resolutions passed by certain countries. I see no reason for me to place in the Library anything of which the hon. Gentleman through his own sources seems to be fully aware.

Mr. Wingfield Digby: Will my right hon. Friend bear in mind the special problems of the dairy farmers in the South-West particularly affected by this Review?

Mr. Soames: Of course, this was a considerable feature of the discussions at the time of the Review. My hon. Friend will not have forgotten that in the outcome we increased the guaranteed price of milk by ½d., which together with the increased standard quantity put another £6 million into the dairy side of the industry. In contemplating whether that figure should or should not have been increased, one must bear in mind the supply and demand situation, the amount of milk which it is in the national interest that we should produce at home and the difficulties that have resulted through increased production bringing in its wake reduced prices to producers. We do not want to set up that spiral again.

Mr. Peart: Is not the right hon. Gentleman aware that farming opinion is that the small producer has suffered considerably as a result of Government policy? Is he not aware that right throughout the farming world, not just the official National Farmers' Union circles, there is great concern? What are the Government going to do for the small farmer? Are they going deliberately to squeeze him out?

Mr. Soames: When the hon Gentleman says "throughout the agricultural world" it is, of course, true, but this by no means applies only to this country—

Mr. Peart: It is true here.

Mr. Soames: —but it is true throughout countries with developed farming where the increase in production has been rising faster than consumption. This Government have done a tremendous amount for the small farmers—

Mr. Peart: Squeezed them.

Mr. Soames: —and the Government realise the immense value of the contribution they make to the national economy. I believe that our record vis-à-vis the small farmers can stand up against the record of any other Government.

Mr. Peart: Nonsense.

Shellfish Industry

Mr. Bullard: asked the Minister of Agriculture, Fisheries and Food whether he will give Government assistance to the shellfish industry similar to that given to other sections of the fishing industry in view of the effect of the severe winter on the stocks of shellfish.

Mr. Scott-Hopkins: Although the recent bad weather has had a very severe effect on some sections of the shellfish industry, this is not in itself sufficient reason for the Government to change its decision against giving a subsidy to the shellfish industry. But, as my hon. Friend will know, grants are now available under the Sea Fish Industry Act 1962, towards cleansing and restocking oyster beds badly affected by pests and disease.

Mr. Bullard: Will my hon. Friend bear in mind that when he refused the request for the subsidy to be extended to shellfish he did so on the ground that the economic condition of the industry did not merit it? Is he aware that the shellfish industry is not by any means the most prosperous section of the fishing industry and that it has had an extremely hard time as a result of the weather? As he has been able to do something about oysters, which are rather the rich man's dish, would he not therefore be prepared to do something about the poorer man's mussels and whelks and other shellfish and remove a manifest injustice within the fishing industry itself?

Mr. Scott-Hopkins: My hon. Friend will realise that what we have done about oysters is to help the industry to clear disease in the beds. Surely he will agree that it would be invidious to give special help to one section of the agricultural and fisheries industry, because many sections of the industry have suffered from the appalling conditions in the recent winter.

Trawlers (Grants and loans)

Dame Irene Ward: asked the Minister of Agriculture, Fisheries and Food how many applications have been submitted for grants and loans in respect of trawlers; and how many trawlers have been granted loans since the inception of the scheme, in Scotland as well as in England and Wales.

Mr. Soames: Since the grant and loan schemes began in 1953, there have been 317 applications for grants and loans for new trawlers for England and Wales and 182 for Scotland. For England and Wales 234 and for Scotland 124 applications have been approved.

Dame Irene Ward: Yes, but would my right hon. Friend tell me how many of these approvals were related to tenders? Is he aware that in a letter to me recently I was told it would be very difficult to obtain tenders for trawlers? Is he aware that what I should like to know is, if it is difficult to obtain tenders for trawlers why do we have to have this arrangement that any trawler owner can place an order abroad if he so desires—if it is so difficult to have tenders? Would my right hon. Friend please answer the full implications of my question?

Mr. Soames: Yes. The question of tenders applies specifically to a trawler owner who is wishing to place an order abroad. The White Fish Authority would not allow him a grant and loan on that order unless he had got tenders in this country. It was as a protection to our shipbuilding industry that this was put in. The House will remember the discussion we had on it some time back. Since the beginning of last August, when the restrictions on grants and loans to foreign built vessels were lifted. seventy-nine applications have been received by the White Fish Authority, and none of those was for a vessel to be built abroad.

Dame Irene Ward: Will my right hon. Friend tell me how many of the total grants and loans which have been agreed have been the basis of tenders given to the trawler owners who are trying to make their arrangements with shipbuilders?

Mr. Soames: The need for tenders applies specifically if a trawler owner wishes io build abroad.

Agricultural and Horticultural Produce (Patent Rights)

Mr. Maginnis: asked the Minister of Agriculture, Fisheries and Food when he expects to legislate for patent rights on agricultural and horticultural produce.

Mr. Scott-Hopkins: I regret that at present I have nothing to add to the reply giver to my hon. Friend the Member for Maldon (Mr. B. Harrison) on 27th March.

Mr. Maginnis: Is my hon. Friend aware that growers in Northern Ireland are very co3cerned about this? Will he do his best to have this agreement signed at the earliest possible opportunity?

Mr. Scott-Hopkins: I appreciate the concern of my hon. Friend for his growers in Northern Ireland. I can assure him that we moving as fast as we can, but, of course, there are many claims on Parliamentary time.

Agricultural Industry (Incomes)

Mr. Maginnis: asked the Minister of Agriculture, Fisheries and Food what estimate he has formed of the loss in income of the agricultural industry over the last five years; and how this compares with the average change in income level in Great Britain as a whole in the same period.

Mr. Wall: asked the Minister of Agriculture, Fisheries and Food what estimate he has made of the proportionate change in incomes in the agricultural industry over the last five years; and how this compares with the general rise in incomes in Great Britain in the same period.

Mr. Soames: Figures for Great Britain are not available, but for the United Kingdom as a whole, the income of farmers increased by 18 per cent. between 1958 and 1962. Total personal income increased by 28 per cent., but while the number of farmers is stable or even declining somewhat, the size of the population rose aver this period by about 3 per cent.

Mr. Wall: Is my right hon. Friend aware that farmers believe that their standard of living has not kept pace with the general rise, and that they believe


that his Ministry sometimes overlooks the fact that the greater capital invested in the industry has to be serviced? Would he consider publishing the comparative figures for the agricultural and other comparable industries?

Mr. Soames: The rise in total personal incomes is, of course, dominated by the rise in wages, which has been such a marked feature of the post-war economy. Farm income necessarily tends to rise more slowly than other income, when the demand for other goods and services is rising faster than the demand for food. Perhaps the hon. Gentleman would let me have more details as to what are the figures he wishes me to give him.

Fisheries (Conference)

Mr. Wall: asked the Minister of Agriculture, Fisheries and Food what discussions he has had with the fishing industry about the proposed conference on limits and markets; and whether representatives of the industry will attend the conference.

Mr. Soames: I am in close touch with the representatives of the fishing industry. The question of their attending the conference will be for consideration.

Meat Pies

Mr. Lipton: asked the Minister of Agriculture, Fisheries and Food what action he is taking on the report of the Food Standards Committee on the contents of meat pies.

Mr. Scott-Hopkins: My right hon. Friend has invited the interests concerned to comment on the report.

Mr. Lipton: Having already blotted his copy-book by rejecting the Committee's suggestion on the subject of sausages, will the hon. Gentleman give an undertaking that in listening to these representations he will reject the most fantastic suggestion that was made to the Committee to the effect that a meat pie is a farinaceous article and that meat is present only to give flavour? Is it really too much to expect so-called meat pies to have at least 25 per cent. minimum meat content?

Mr. Scott-Hopkins: I cannot give the hon. Gentleman that assurance. I have said that my right hon. Friend will con-

sider the comments he has asked for and then he will take a decision.

Mrs. Slater: Will the hon. Gentleman also look at this problem from the point of view of the housewives and of the local authorities? Is he aware that local authority food inspectors find it very difficult to deal with anyone who is found supplying either sausages or meat pies with little meat content? The housewife is being robbed enough already without any further impositions at the present time.

Meat Marketing (Verdon-Smith Committee)

Mr. Bossom: asked the Minister of Agriculture, Fisheries and Food whether, in view of the urgency of the matter, he will ask the Verdon-Smith Committee on Meat Marketing to issue an interim report before completion of its programme towards the end of the year.

Mr. Soames: No, Sir. This complex subject is being investigated as a whole, and an interim report covering only part of the field would be of doubtful value.

Mr. Bossom: Will my right hon. Friend try to hasten this much-needed report by this excellent Committee? Does my right hon. Friend realise the growing concern among the general public and the farming community about the rising subsidy bill and also about the problem of imports of meat at present?

Mr. Soames: Of course, I am aware of this problem, and it was this which prompted the Government to set up the Committee which, as my hon. Friend rightly says, is an excellent one. To some extent, the matter must be left to the Committee. It is aware of the urgency of the matter. It is a question of its being able to cover the necessary ground as quickly as possible.

Mr. Peart: Is the right hon. Gentleman aware that his discussions with the industry on future policy could be affected by the recommendations of this Committee or, indeed, by the discussions on them? Would it not, therefore, be possible to give a hint to this important Committee that its work should be speeded up?

Mr. Soames: It is working as fast as it can to get the report out as soon as possible.

Exported Sheep (Transport)

Sir B. Janner: asked the Minister of Agriculture, Fisheries and Food whether he is aware of the case of 457 sheep, purchased in Carlisle by a Dutch dealer, and conveyed from there by road to Dover, after which the transport of these animals from Dover to Paris took 54½ hours, five of the sheep being found dead on arrival; and whether he will consider making an order to prevent suffering to sheep exported from this country on similar lines to the Exported Cattle Protection Order, 1957.

Mr. Scott-Hopkins: This consignment has been brought to my notice. I will examine the suggestion made in the last part of the question and will let the hon. Member know my views.

Sir B. Janner: Is the hon. Gentleman aware that, but for the fact that the sheep arrived in such a shocking condition in Paris as a result of their experience on the way, they would have been sent on to Nimes and Toulon? Will he assure the House that he will take immediate action on this matter, which is terribly important?

Mr. Scott-Hopkins: I assure the hon. Gentleman that I will look fully into the circumstances of this case.

Mr. R. W. Elliott: This is a deplorable case. It is a very long way from Carlisle to Dover, and for animals to have to undergo a journey lasting 54½ hours represents frightful cruelty. Will my hon. Friend take due note of the possibility of some amendment to the Exported Cattle Protection Order so as to include other animals besides those named in it?

Mr. Scott-Hopkins: The Animals (Sea Transport) Order, 1930, covers transport arrangements of all animals leaving this country, but I will look at the point raised by In) hon. Friend.

Feedingstuffs

Mr. Prior: asked the Minister of Agriculture, Fisheries and Food to what extent soft wheat can be reasonably substituted for maize in the feedingstuff rations of poultry, pigs, dairy cows and fat cattle.

Mr. Soames: One cannot be specific on this point but soft wheat can be used to some extent instead of maize in the feedingstuff rations of most livestock, especially poultry, and compound manufacturers generally are alive to the advantages of including home-grown wheat in their rations when prices are favourable. It is estimated provisionally that just under 2 million tons of homegrown wheat from the 1962 crop will be used for animal feeding compared with just over I million tons from the 1961 crop.

Mr. Prior: I thank my right hon. Friend for that reply. Will he try to persuade hit advisory officers and experimental farms to carry out much more research into the use that soft wheat can be put to in place of other feedingstuffs, particularly as it can be grown well and cheaply at -tome, whereas maize has to be imported?

Mr. Soames: There is a good deal of 'interchangeability among different cereals. There are advantages, sometimes, of price, delivery times and of quality in using specific proportions. Of course, during the time my hon. Friend was referring to the imports of barley were very much down. My hon. Friend will be aware of a considerable increase in the production of home-grown barley.

Mr. Prior: asked the Minister of Agriculture, Fisheries and Food by what percentage maize imports increased in 1962 over 1961; and what effect these increases hid on the price of homegrown cereals.

Mr. Soames: Maize imports in the calendar year 1962 increased by about 45 per cent. compared with 1961 from 3·2 million tons to 4·6 million tons. About 70 per cent. of maize imports in 1962 came in before our home crop was marketed in volume and heavier maize imports over the year as a whole were offset by a big fall in our imports of barley. In addition, total requirements of concentrated feedingstuffs increased substantially over the period. Prices of home-grown cereals are influenced by a variety of factors and it is impossible to isolate the effect of the rise in the volume of maize imports.

Mr. Prior: Is my right hon. Friend aware that the use of feedingstuffs is to some extent bound up with their price?


If the home market is to be flooded as a result of large production at home or of excessive imports, then prices will fall and more feedingstuffs will be used. Would it not be right to encourage home production of feedingstuffs and to put no restrictions upon them until some effort is made to curb excessive imports?

Mr. Soames: The stability of the market generally, and all that flows from it for imports and for home production, is one of the major factors of the Government's deliberations at the moment. But I cannot as yet make an announcement.

Sir H. Harrison: Is my right hon. Friend aware that he is quite right in saying that barley can be used as a substitute for maize? Will he impress on all concerned the importance of using home-produced barley as against foreign maize?

Mr. Soames: The rate at which the crop both of barley and wheat is being taken up is satisfactory. It is difficult to be specific on these things. One can say that barley can be substituted for maize, but there is considerable latitude for different proportions.

Animals, Dartmoor (Severe Weather Conditions)

Mr. Hayman: asked the Minister of Agriculture, Fisheries and Food what progress he is' making in his efforts to prevent further exposure of animals wintering on Dartmoor to the hazards of a severe winter.

Mr. Scott-Hopkins: I understand that the Dartmoor Commoners' Association, working closely with local officers of the Ministry, is making plans to minimise losses of livestock in the event of another severe winter. This is in addition to the help which officers of the Ministry's advisory services give to individual farmers.

Mr. Hayman: Will the hon. Gentleman take into account that a very few Dartmoor farmers wintered the Scots black-faced sheep on the high moors, whereas 90 per cent. of the farmers wintered their native sheep on their own farms? Will he, therefore, discourage farmers from having Scots black-faced sheep on the high moors, since they cannot winter entirely on pastures? It is desirable that during very severe weather

the ponies also should be allowed free access to the deep lanes for shelter.

Mr. Scott-Hopkins: I do not think that the hon. Member's information is quite right. Scots black-faced sheep are extremely hardy and during winter—not even excluding last winter, which was so abnormal—they have wintered extremely well. My information about the ponies is that about 1 per cent. were lost. If they are brought down to the deep lanes and byways they might wander without control.

Sir H. Studholme: Is my hon. Friend aware that the Dartmoor Commoners' Association is arranging for fodder banks to be placed on different parts of Dartmoor and that these could be of great help in feeding animals in winter?

Mr. Scott-Hopkins: That would be of great help.

Mr. Lipton: Why does the hon. Gentleman always minimise the tragedy of the animals on Dartmoor? Is there not a conspiracy between the Ministry and the selfish, callous minority of Dartmoor farmers to keep secret the loss of livestock last winter? Why are not the figures published?

Mr. Scott-Hopkins: I am far from trying to minimise the losses. I want to keep a sense of proportion and to give the facts as far as they can be ascertained.

Witham Improvement Scheme

Mr. Taverne: asked the Minister of Agriculture, Fisheries and Food if he will reconsider his refusal to grant aid to the Lincolnshire River Board on part of the contract sum for the Witham Improvement Scheme.

Mr. Scott-Hopkins: My right hon. Friend has reconsidered this decision very carefully but can find no grounds for reversing it.

Mr. Taverne: Is the hon. Gentleman aware that there was in this case a delay between April and August in the consideration of the estimates submitted by the Board, so that the extra cost incurred was entirely the responsibility of the Ministry? Is it not inevitable, therefore, that the Board should seek to save further costs to itself and the taxpayer? Should not the Ministry reconsider this?

Mr. Scott-Hopkins: To a large extent, the delay was due to a discrepancy between the Board's original estimate and the tender price. This difference was about £200,000. When sums of that nature are involved, we must be very careful. In the past, the Board has infringed rules concerning grants and it is only right that we should stick to the regulations.

Mr. Taverne: Is the hon. Gentleman aware that at the meeting with the Clerk to the Board the Ministry was requested to name previous cases in which schemes had been started without approval, but that it could not name one? Indeed, there has been only one case involving a very small sum in 1957.

Mr. Scott-Hopkins: The Board has been warned on twelve occasions in the last five years that its estimating was inadequate and that it should not begin schemes without prior approval.

Fish (Antibiotic Treatment)

Mr. Wainwright: asked the Minister of Agriculture, Fisheries and Food if he will seek immediate consultations with the Federation of British Port Wholesalers' Association on the antibiotic treatment of fish; and if he will make a statement.

Mr. Scott-Hopkins: The use of certain antibiotics for the preservation of raw fish is now permitted by the Preservatives Regulations, and my right lion. Friend the Minister of Health proposes to make the corresponding changes in the law governing the sale of these substances. My right hon. Friend would, of course, pay close attention to any point the Federation might raise with him.

Mr. Wainwright: Is there not a difference of opinion within the fishing industry about the value of antibiotics in the preservation of fish, and will the hon. Gentleman do what he can to ensure that, in regard to any research which is undertaken, the method of communication down to everyone concerned is such that everyone knows exactly what is happening in this very important matter?

Mr. Scott-Hopkins: My answer to the second part of the hon. Gentleman's supplementary question is,
"Yes, Sir, I

will". A tremendous amount of consultation is ping on with all the interests concerned, and I assure the hon. Gentleman that it will continue.

Oral Answers to Questions — NORTH-EAST

The following Questions stood upon the Order Paper:

Mr. SHINWELL: To ask the Parliamentary Secretary for Science, as representing the Lord President of the Council, whit progress has been made with long-corm plans for industrial development in so far as they affect the unemployment problem in the North-East.

Mr. SHINWELL: To ask the Parliamentary Secretary for Science, as representing the Lord President of the Council, what assistance has been given by his Department to local authorities in the North-East to enable them to proceed with increased housing and the provision of needed amenities.

Mr. W. T. RODGERS: To ask the Parliamentary Secretary for Science, as representing the Lord President of the Council, when the Lord President will reply to the letter he received on 13th March from the hon. Member for Stockton-on-Tees regarding the Stockton ring road; and if he will announce his decision on the construction of a dual carriageway road between Durham Road and Norton Avenue as an agreed measure to improve communications locally in the interests of long-term industrial development.

Mr. Speaker: Mr. Shinwell.

Mr. Gibson-Watt: On a point of order, Mr. Speaker. I notice that Questions Nos. 33, 34 and 35 are all put down to the Parliamentary Secretary for Science. They refer to unemployment, housing and roads. Is it in order that Questions about the North-East should always be put to the Parliamentary Secretary for Science?

Mr. Speaker: I will look at the matter again. Prima facie, all is all right. For the present, I observe that neither the right hon. Member for Easington (Mr. Shinwell) nor the hon. Member for Stockton-on-Tees (Mr. W. T. Rodgers) is present.

Oral Answers to Questions — MINISTRY OF AVIATION

Airport, Glasgow

Miss Harvie: Anderson asked the Minister of Aviation what progress is being made in the construction of alternative airport and landing facilities, to enable Renfrew Airport to close.

Mr. Rankin: asked the Minister of Aviation if he will make a statement on the outcome of his meeting with the representatives of Glasgow Corporation on the future of Glasgow's airport.

The Parliamentary Secretary to the Ministry of Aviation (Mr. Neil Marten): Design work on a new civil airport at Abbotsinch has been going ahead. The next stage in the development is dependent on the outcome of negotiations between the Ministry and the Glasgow Corporation. These negotiations are at an early stage and it would be premature to make a statement at this juncture.

Miss Anderson: Does my hon. Friend agree that it is time that there was a decision in this matter, since the new airport was due to open in 1963? Will he look again at the new airport design, which seems to be old-fashioned and makes no provision far passengers to walk to and fro under cover?

Mr. Marten: I will look at the design. As regards getting on with a decision, the matter rests between two parties to a negotiation.

Mr. Rankin: Is the hon. Gentleman aware that, when I flew over Abbots-inch this morning, it was seen to be in exactly the same state as it was three years ago when the question of the new airport first arose? No progress whatever has been made. If the trouble resides between the Minister and Glasgow Corporation, then, in the interests of aviation in Scotland, of the travelling public and of business people, could not the Minister go ahead with the development of Abbotsinch and leave his quarrel with Glasgow Corporation to settle itself in a normal fashion?

Mr. Marten: The hon. Gentleman is quite wrong; there is no quarrel with Glasgow Corporation. There are discussions going on at present, and I do not wish to make any comment on those

discussions at this stage. If the negotiations reached a satisfactory conclusion in the near future, construction work could start at the end of yerar.

Mr. Rankin: I did not insinuate that there was anything very evil in the quarrel. It is a difference, and is it not a difference over money? Does not the hon. Gentleman realise that this matter has been delayed far too long and that, ultimately, the Minister must bear the chief responsibility? Could he not go ahead with the development of the airport and have the quarrel or difference with Glasgow settled quietly while the development goes on?

Mr. Marten: While the discussions are going on—they are discussions and not a quarrel—it would be a great mistake to start work. It is, surely, better to finish them first—I hope that it will not be too long—and then, if we get agreement, go ahead with the work.

TSR 2 Nuclear Weapons System

Mr. Healey: asked the Minister of Aviation if he will now publish his estimate of the total cost of the TSR 2 nuclear weapons system.

The Minister of Aviation (Mr. Julian Amery): No, Sir

Mr. Healey: Cannot the Minister even confirm the estimate of £400 million as the cost of completing the whole system? Also, can he say how big the increase of cost is likely to be in order to extend the range of the aircraft so that it can properly be described as strategic, as it was in the last White Paper?

Mr. Amery: I certainly cannot confirm an estimate which appears to have come out of the hon. Gentleman's head. I can neither confirm nor deny any of these figures. It is not the practice, and has not been the practice for many years, to give estimates of the cost of military weapons, which could provide important information to those who wish us ill. As far as I know, there is no intrinsic addition to the cost to be found in the extension of the TSR 2 to the strategic role; it has always been foreseen that it could be used in this role. I am speaking here, of course, of the aircraft itself, and not of any weapons used in conjunction with it.

Mr. Healey: But is not the Public Accounts Committee always able to obtain these estimates if it wishes, and is not the Minister concealing something which is of interest to the people of this country and which the enemy probably know already?

Mr. Amery: I have no reason to believe that the enemy know this already. Obviously, if 1 were to give the figures across the Table here, they would have every opportunity of knowing it.

Aircraft and Equipment, South Africa

Mr. Eden: asked the Minister of Aviation which firms are engaged in the manufacture of aircraft and aircraft equipment for South Africa.

Mr. Marten: At least fifty companies are engaged on this work. It is not the practice to list the names of companies engaged on defence contracts whether for Her Majesty's Government or for other countries.

Mr. Eden: Does my hon. Friend know how many employees are involved or what is the value of the current contracts? Will he agree that the pronouncement of the Leader of the Opposition has already done considerable damage to the British aircraft industry and, in fact, it is quite impossible to replace these orders with others from elsewhere?

Mr. Marten: The last part of my hon. Friend's supplementary question opens up very wide issues. Confining myself to the Question on the Order Paper, I would say that it is not our practice to disclose the value of defence contracts placed by other Governments. As regards the first part of my hon. Friend's supplementary question, the total number employed by the aircraft firms concerned is about 135,000. The work involved in these orders is equivalent to a year's employment for about 25,000 people, of whom about 13,000 are in the aircraft industry, 4,000 in the electronics industry and 8,000 in other ancillary industries.

Mr. Lee: Is the hon. Gentleman aware that there is no evidence whatever that, as a result of anything said from this side of the House, a single person would be unemployed in the aircraft industry? Further, is he aware that the issues raised in South Africa are of enormous conse-

quence in the relationship of the white and coloured world and that, if the party opposite wishes to associate itself with apartheid and all it stands for, the British people will judge accordingly?

Mr. Marten: As regards the first part of the hon. Gentleman's supplementary question, I gave my answer in reply to the supplementary question from my hon. Friend the Member for Bourne-mouth, West (Mr. Eden). As regards the second part, I share with the hon. Gentleman an equal dislike of apartheid

Avro 748 MF Aircraft

Mr. Goodhew: asked the Minister of Aviation when he expects to sign a contract for the supply of Avro 748 military transport aircraft required by the Royal Air Force; and when he expects delivery to commence.

Mr. J. Amery: Work on the order for Avro 748 MF aircraft for the R.A.F. is proceeding under an interim contract signed last October. A full fixed-price contract is in the final stages of negotiation. I ant not prepared to forecast delivery dales at this stage.

Mr. Good hew: How long is the Royal Air Force to wait for this aircraft which it needs so vitally? It is eighteen months since we were assured that it would be produced very soon. Is my right hon. Friend aware that, had his predecessor agreed upon an aircraft desired by the Royal Air Force, the Handley Page Dart Herald, deliveries would have commenced already?

Mr. Amery: I am not prepared to comment on the last part of my hon. Friend's supplementary question because I have not the figures to my hand at the moment. I was closely involved in that particular discussion. If it is any consolation to my hon. Friend, I can tell him that I am flying to Bonn in an Avro 748 this evening.

Armstrong Whitworth 681 Aircraft (Engines)

Mr. Goodhew: asked the Minister of Aviation whether he has yet arrived at a decision on the engines to be used in the Armstrong Whitworth 681 military transport aircraft.

Mr. J. Amery: No, Sir.

Mr. Goodhew: Is not my right hon. Friend aware that the works responsible for producing this aircraft is anxious to have a decision at the earliest possible date and that we cannot go on having delays in these important requirements for Service aircraft? Has my right hon. Friend considered the possibility of using Rolls-Royce engines?

Mr. Amery: I assure my hon. Friend that there is no cause for anxiety in this matter. Both engine companies, Rolls-Royce and Bristol Siddeley, are in touch with Hawker Siddeley, the airframe manufacturers, at this stage, and the selection of an engine will be made in perfectly good time to fit in with the development of the aircraft.

Mr. Healey: But is it not a fact that five years have now elapsed since the operational requirement for this aircraft was first defined? In view of the extreme shortage of transport aircraft for the Armed Services at the moment, can the Minister justify this long delay?

Mr. Amery: The irrelevance of the hon. Gentleman's supplementary question passes belief. The airframe can be completed only within a certain time scale, and there is still plenty of time within that time scale for us to deliberate on the choice of engine.

Mr. Eden: Will my right hon. Friend agree that the important consideration in the timing of these orders is the attempt to maintain in being the existing design teams and teams of men who have been working on them, and does he realise that it is for this reason that the company is so anxious to get a firm order as quickly as possible?

Mr. Amery: This consideration is very much in our minds. The view of Hawker Siddeley, the company responsible for the airframe, must also be carefully taken into consideration in deciding which engine is best suited to the aircraft in question. We still have some time in which to make the decision.

Mr. MacDermot: Is the Minister aware that there is growing concern among workers in the aero-engine industry at the uncertainty of their future? Is this also a factor which he will take into account in trying to reach an early decision?

Mr. Amery: I assure the hon. and learned Gentleman that this is a factor very much present in my mind. It is a matter of uncertainty at the moment and not more than uncertainty where they are concerned. There is still time to deliberate on this decision and make sure that we get the best engine for the airframe so that the Royal Air Force may have the best possible aircraft.

SCI Aircraft

Mr. McMaster: asked the Minister of Aviation what progress has been made in the evaluation of the system of multi-jet vertical take-off and landing pioneered by Short Brothers and Harland in the SC1.

Mr. Marten: I refer my hon. Friend to the Answers given on 19th November, 1962 and 25th February last. As he will also have noted from my right hon. Friend's statement of 5th March, one of the reasons for choosing the AW681 as a basis for the Hastings/Beverley replacement is its potential for conversion to V.T.O.L. capability by this system, if it should be required.

Mr. McMaster: In view of the know-how which Short Bros. and Harland has in this work, which leads the world, will my hon. Friend consider expediting this matter, which, as he himself has said, has gone on since November, 1962, or, in fact, earlier, and developing or purchasing some other transport aircraft in order to experiment with the application of multi-jet vertical take-off and landing in anticipation of the 681 project?

Mr. Marten: This programme of research with the SC1 which we are pursuing is of a general and continuing nature and it is not related solely to multi-jet V.T.O.L. There is at present no firm requirement to give the AW 681 itself a V.T.O.L. capability.

Oral Answers to Questions — PENSIONS AND NATIONAL INSURANCE

Sickness Benefit

Mr. Wainwright: asked the Minister of Pensions and National Insurance how much sickness benefit was paid out in 1959, 1960, 1961, and 1962, respectively.

The Minister of Pensions and National Insurance (Mr. Niall Macpherson): About £135 million, £130 million, £149 million and £156 million respectively. The figure for 1962 is provisional.

Mr. Wainwright: Is not this a large sum of money to be paying out for sickness? Is the Minister satisfied that we are spending sufficient money on the prevention of sickness rather than paying out for sickness, and will he have consultations with his right hon. Friends to ensure that money is spent on research to ensure that the number of persons off work through sickness can be reduced?

Mr. Macpherson: That matter is rather outside my field. I note what the hon. Gentleman says about consultation with my right hon. Friends. We can, of course, help by obtaining detailed information about the incidence of incapacity for work, and this we are doing.

Sir J. Duncan: Does my right hon. Friend's original Answer mean that there is more sickness or that the rates of sickness benefit have gone up in those years?

Mr. Macpherson: I was asked about the years 1959, 1960, 1961 and 1962. The rates of benefit went up in 1961, and, of course, this is reflected in the figures.

Industrial Injuries Benefit

Mr. Swingler: asked the Minister of Pensions and National Insurance (1) in view of the anomaly of denying industrial injury benefit to those who suffer the same injuries by process as those by accident, if he will bring forward amending legislation to include industrial injury by process in the Industrial Injuries Act;

(2) what consideration he has given to the case of Mr. James Wilson, of 17 Marsh Parade, Newcastle-under-Lyme, who has been denied industrial injury benefit on the ground that he has suffered disablement from the process of using pneumatic drills and not from an accident; and if he will make a statement.

Mr. N. Macpherson: The problem with winch the hon. Gentleman is concerned was very fully considered by a

Departmental Committee under the chairmanship of Mr. F. W. Beney, Q.C., and I refer the hon. Member to paragraphs 51 to 56 of its Report, Command Paper No. 9548.

Mr. Swingler: I have considered that Report, and I thank the Minister for the fairly long reply which he sent to me about this case, but may I ask whether he is aware of the gross injustice being suffered by many industrial workers today? Is he aware that, in the case of Mr. James Wilson, particulars of which I have submitted to him, the Insurance Commissioner himself said that
 The medical evidence makes it perfectly clear that the claimant's condition has been brought on gradually over 30 or possibly even 40 years by his work in the pits …
Is it not c ear that this man is disabled by his work in the pits and that, as a result of the anomalous state of the law in excluding injury by process—in fact, one could say that it is a long series of accidents—he is not entitled to any kind of compensation at all? Is not this completely wrong'? Will the Minister consider the matter again?

Mr. Macpherson: I do not think that I could agree with the hon. Member that a very large number of people are involved. As I explained in my letter to him, the general problem here is that of distinguishing the genuinely occupational case, the case which arises out of the occupation, from many other cases which might be thought to have arisen out of the occupation, but which in fact could not be associated with it. Until we got some means of distinguishing between the one and the other, it is not possible to specify a process and prescribe it as being due to the occupation.

Mr. Swingler: Has not the Insurance Commissioner himself admitted that this is a genuinely occupational case? Does not the quotation from the Insurance Commissioner's statement, which I believe I have fairly given, make it clear that this case is genuinely occupational? Cannot the Minister's advisers make an amendment to the law to ensure that these cases, accepted by the tribunal as genuinely occupational, are brought within the scope of the scheme?

Mr. Macpherson: As I have explained, the difficulty would be to be able to grant some kind of relief in those cases


without opening the flood gates to a great many other cases which it would not be possible to distinguish. This is the matter which the Beney Committee went into at great length. It started with the object, if possible, of making recommendations which would bring relief to these cases, but it was unable to recommend a way of doing so.

Miss Herbison: Surely the Minister will not leave it there. Is he not aware that in the case about which my hon. Friend is concerned it was accepted that the man's disability was due to the nature of his work for many years? Where there are cases where it can be proved that the disability is due to the man's work, ought he not to have industrial injuries benefit and not be fobbed off by being told that if his case is accepted, there will be a flood of others? Surely the Minister cannot leave it where it now is.

Mr. Macpherson: The whole difficulty is to say in what cases a particular injury is due to the occupation. This was not the matter on which the Commissioner had to pronounce. He said that in this case it was due to work, but that was not the matter which he had to examine. He was considering whether this particular injury was within the ambit of the Industrial Injuries Act, and he decided that it was not.

TROOPS, NAIROBI (INCIDENT)

Mr. Paget: Mr. Paget (by Private Notice) asked the Secretary of State for War whether he has a statement to make with regard to the military riots in Nairobi.

The Secretary of State for War (Mr. John Profumo): During last Saturday night a number of incidents occurred in Nairobi, involving damage to property.
As is normal, large numbers of British Service men stationed in or around Nairobi were off duty in the city. The incidents reported appear to have been caused by a small number of Service men, and investigations both by civil and military authorities are now proceeding.
Five soldiers are at present in military custody.
The causes of the incidents have not so far been established, but it is thought that they may have been connected with the murder last week of a British private soldier of the 1st Battalion, Staffordshire Regiment.
The Commanding Officer of the Staffords personally warned all ranks of his unit prior to the weekend against disturbances or any attempts to take the law into their own hands.
None of those so far apprehended comes from the Staffordshire Regiment.

Mr. Paget: Can the right hon. Gentle-many tell us any more about how this private in the Staffordshire Regiment came to be murdered, and the circumstances? Secondly, does he not feel that incidents of this sort, reflecting on the discipline and morale of the Army, are getting too frequent?

Mr. Profumo: Indiscipline is always to be deplored, but the use of the word "riot" gives an entirely misleading impression. A riot involves a crowd indulging in an outbreak of lawlessness, and that is not what happened, according to what I have been told so far, in this case.
I have no further details of the motives in the murder of Private Jones, although, so far as we can ascertain, there is absolutely no question of racial or political motives.

Mr. Grimond: The right hon. Gentleman's statement referred to damage to property. Do we understand that so far he has no information of any damage to persons? Secondly, from his answer to the hon. and learned Gentleman's supplementary question, are we to understand that reports of about 100 people being involved are probably exaggerated? Thirdly, has he had any previous evidence of dissatisfaction with conditions in Nairobi?

Mr. Profumo: I have no information, even now, about any dissatisfaction with conditions in or around Nairobi which could possibly have led to what occurred on Saturday night. I am glad to have the opportunity of emphasising that so far as I know—and the House will understand that these are rather early days—there were no organised bands of large numbers of soldiers, as has been


reported in certain sections of the Press as having done this. I think that there were two sorts of incidents—those in bars, where there were certain fights, and so on, and those involving a number of taxis. I do not believe that they were necessarily related.

Mr. Wigg: I am sure that hon. Members on both sides of the House will wish to express their sympathy with the relatives of the soldier who has lost his life. Has the Secretary of State taken any steps whatever to institute a court of inquiry to inquire into the circumstances in which these acts of indiscipline have occurred? If not, will he do so in terms which will also cause an inquiry to be made into his personal responsibility for the lowering of standards right throughout the Army as the result of his own policy?

Mr. Profumo: I do not quite accept the latter part of the hon. Gentleman's contention. Whatever he may feel, I do not accept that the standards of the Army, or its discipline, have been markedly lowered. Nor can I accept that incidents which have been occurring in the Army are necessarily correlated.
The other day, when the hon. Gentleman could not be present, I was asked whether 1 would institute an inquiry into "bull". I refused, because I do not believe in dealing with this sort of thing at that sort of level. I believe that incidents of this sort should be dealt with by commanding officers and the Army itself.

Mr. Bellenger: As I have recently visited Nairobi and seen the conditions in which our troops there live, will the right hon. Gentleman accept my assurance that the conditions of our troops in Nairobi are far better than those in many other parts of the world? Will he say what is to happen in the case of the British soldier who has been murdered? Are active inquiries being made to apprehend the murderer and to deal with him in accordance with law?

Mr. Profumo: Yes, Sir. I did not address myself to that in my main Answer, because I was asked about so-called riots, but I can give an undertaking that the very sad death—murder—of this British soldier is being fully and properly examined. I cannot make any

statement about that, because it is under examination.

Sir W. Bromley-Davenport: Is it not rather regrettable, Mr. Speaker, on an occasion such as this that, with the exception of two, hon. Gentlemen opposite should attack our troops instead of sympathising with the victim and his next-of-kin?

Mr. Speaker: Order. The hon. and gallant Gentleman addressed his question to me, and I do not think that it raises a point of order.

Sir W. Bromley-Davenport: I did not raise a point of Order, Mr. Speaker, and I apologise. In my anxiety I was addressing my question to you, but I meant to address it to the Minister.

Mr. A. Henderson: In view of the fact that Private Jones lived in my constituency, perhaps I might be permitted to ask the right hon. Gentleman whether it will be possible for him to give sympathetic consideration to the desire of the widowed mother of this soldier that his body be brought home and buried in Tipton alongside his father.

Mr. Profumo: I have been informed of this desire, and although I cannot give an actual answer at the moment, I give an undertaking that I shall consider this with all sympathy.
With regard to the question asked by my hon. and gallant Friend the Member for Knutsford (Sir W. Bromley-Davenport), C am sure that no hon. Member would willingly wish to attack the British Arm but I am grateful to him for what he said.

MINISTRY OF AVIATION (BEAGLE B206 AIRCRAFT)

The Minister of Aviation (Mr. Julian Amery): With your permission, Mr. Speaker, and that of the House. I should like to make a statement about the light aircraft project known as the Beagle B206.
The House may recall that British Executive arid General Aviation Ltd.— generally known as Beagle—was formed in 1960 as a subsidiary of the Pressed Steel Company. Its purpose was to bring together a number of existing light aircraft manufacturers and to specialise in this field. Among its new projects is the


Beagle B206, a light twin-engined executive aircraft which the company has designed to meet both civil and military requirements.
Last year I announced my Department's intention to buy two of these aircraft for evaluation and communications flying. I can now inform the House that the Government have decided, subject to satisfactory contract negotiations, to order the Beagle B206 aircraft in a military version for the Royal Air Force. The aircraft will be used for communications duties at present carried out by Ansons.

Mr. Lee: Will the Minister say whether it is notable that we are to have an order from a firm outside the consortia? For instance—take the Handley Page Herald—we always understood that the announcement made some time ago that membership of the consortia was a sort of condition of Government orders was to remain the policy of the Government. What is the significance of his announcement? The right hon. Gentleman says that two of these aircraft were bought for experimental purposes. What is the size of the order?

Mr. Amery: My right hon. Friend the present Secretary of State for Commonwealth Relations, in a statement to the House at the time, specifically named the light aircraft industry as a likely extension to the constitution of the two main groups.
It is not the normal practice to quote numbers, but in this case I see no security objection to telling the House that the immediate order under negotiation is about 20.

Sir A. V. Harvey: Will the Minister give an assurance that tenders for Government contracts for aircraft will be

considered on price, delivery, and merit of the product? There should be no binding to any firm or group. All British companies should be considered equally. Further, will the Minister say when this aircraft is due to be delivered?

Mr. Amery: I entirely agree with the premise of my hon. Friend's question, and there was something of a competition before this decision was taken. I cannot at this time make a firm statement about delivery.

Mr. Temple: Will the Minister say what considerations were in his mind when selecting this aircraft as against the de Havilland Dove, which is a product of one of the larger groups?

Mr. Amery: All relevant considerations have been taken into account. The Dove 8 is an excellent aircraft, though larger and rather more expensive than the Beagle B206. It is possible that the Royal Air Force will later require further aircraft to replace the rest of its Ansons, and the Dove is by no means ruled out as part replacement for some of these.

Mr. Wade: So that the industry may have some idea of its prospects, can the Minister say how many of these aircraft will be ordered this year?

Mr. Amery: We are in contract negotiation with the firm, so I cannot specifically say what orders there will be in what month. I have indicated the general scope of the order and the decision that the Government have taken.

Mr. MacDermot: Can the Minister say what kind of engine is to be incorporated in these aircraft?

Mr. Amery: I understand that it is an American engine being made under licence by Rolls-Royce.

Orders of the Day — FINANCE BILL

Order for Second Reading read.

3.45 p.m.

The Financial Secretary to the Treasury (Mr. Anthony Barber): I beg to move, That the Bill be now read a Second time.
This is the fouth successive Finance Bill with which I have been concerned as a Treasury Minister. I am not quite sure whether there is any particular conclusion that I ought to draw from such tenure of office, but I think that it entitles me to pay a tribute to the two hon. Gentlemen who are to lead for the Opposition.
The hon. Member for Sowerby (Mr. Houghton) has, I think, an unrivalled experience of the actual mechanics of the Income Tax Acts and the practice of the Inland Revenue, and because of his good sense and responsibility we all know that when, from time to time, he attacks the Government he does not really mean it.
I understand that in recent years the drafting of most of the Opposition's Amendments and new Clauses to Finance Bills has been the result of the skill and assiduity of the hon and learned Member for Kettering (Mr. Mitchison). I think that most hon. Members will regard his efforts as highly successful, although occasionally his subtlety has led to strange consequences. There was a time when he attempted to exempt from duty heavy oil used in agricultural machinery. He did this by reference to an exemption for coastal shipping. The consequence was certainly to exempt agricultural tractors from duty, but only while engaged on a voyage in home waters.
Today and for the next two weeks we turn from the more general aspects of the Budget to the implementation of the specific proposals announced by my hon. Friend. The Bill is a comparatively long one, although I think everyone will agree that it is by no means all controversial. I know that many hon. Members wish to take part in this debate. Obviously, I cannot cover all the 69 Clauses and 12 Schedules. I think, therefore, that the most helpful approach is to concentrate not necessarily on those proposals which are, in fact, the most important, but on

those where further elucidation or explanation would be most helpful not only for today's debate, but in preparation for the Committee stage. This leaves me with quite a lot of ground still to cover, so I come straight to the Clauses.
Clause 1 extends for a further year the Customs and Excise regulator—the power to apply surcharges or rebates to Customs and Excise revenue duties and Purchase Tax. I doubt whether anyone in the House will dissent from the renewal of this power, but there is one procedural difference this year compared with the previous years which I should mention.
The Clause provides that regulator changes involving reductions in taxation should be subject to affirmative Resolution within 21 sitting days as distinct from calendar days. As my right hon. Friend the Chancellor of the Exchequer explained, this will give greater flexibility for reductions in taxation while retaining the more immediate control of the House which we fully accept as appropriate, for increases in taxation. I hope that the House will consider that this is reasonable and in the general interest.
Clause 2 introduces a number of powers to enable Customs and Excise to compile a register of gaming institutions. As this is an entirely new matter, I think that I ought to explain fairly fully what we have in mind.
The first point to be clear about is that no tax or duty is imposed by this Clause. It is concerned simply with a fact-finding operation to enable us to build up a detailed picture of the varied and widespread forms of gaming which are conduced throughout the country. The purpose is to help with the review that is being made of the possibility of introducing this over a wide field of betting and gaming.
The Clause provides that any person responsible, in the year ending 31st July, 1963, for organising or providing premises or apparatus for gaming, or receiving any entrance fee or subscription therefor, or who commences to do so in the next year, must noty the Commissioners of Customs and Excise, and must subsequently furnish such information as they may require. Traders who manufacture, import or deal in gaming machines—which, I am told, are frequently leased rather than sold—may be asked to furnish information about such machines.
As it stands, the Clause provides for a comprehensive inquiry into all forms of gaming, except the purely private and domestic occasion, but the meaning of "gaming" in the Betting, Gaming and Lotteries Act, 1963, referred to in subsection (9), is very wide, and in practice my right hon. Friend does not contemplate the application in every case of the requirement to register and the powers and penalty provisions that necessarily accompany it. An Amendment will, therefore, be moved in Committee to give the Commissioners of Customs and Excise power, by regulation, to exclude from the fact-finding operation certain forms of gaming.
It may be helpful if I say now that the sort of approach which we have in mind is to exclude gaming within Sections 37 and 48 of the Act of 1963, that is, gaming which is promoted in aid of bazaars and fêtes, and other good causes, in which the gaming is incidental to the main purpose and in which any proceeds go to other than private gain. In addition, it is proposed to exclude the playing of dominoes and cribbage for small stakes, which is specially allowed in public houses, and gaming by means of those coin-operated machines—I have never come across any, but apparently there are some—which offer no more to the successful player than his money back or the chance to play again.
We shall also introduce an Amendment to make it clear that in particular cases, where the Commissioners are satisfied that there are good reasons, they may allow an extension of time for notification of gaming. The Commissioners will give wide publicity to an explanation of what is required under the Clause and will give every help to those who are required to register.

Sir Robert Cary: Will it exclude Premium Bonds?

Mr. Barber: It would be unwise at this stage—before we have considered the Clause, and before my hon. Friend has seen the exclusions which we shall refer to in the Amendment, which will give power to the Customs and Excise authorities to make the necessary regulations—to go into further details. I repeat that we are concerned at this stage only with the collection of information—the fact-finding operation—and

the scope of this operation does not determine the scope of any taxation that may subsequently be considered.
Clause 3 provides for reductions in the revenue duties on certain goods imported from other E.F.T.A. countries. The obligation under the Stockholm Convention to provide for the gradual elimination of tariffs on industrial goods imported from member countries applies also to any protective elements in the revenue duties. The present reductions simply continue the process, begun last year, of eliminating the protective elements in the revenue duties on beer, spirits, manufacturd tobacco, matches and mechanical lighters. The removal of these protective elements has in any event, to be completed by the end of 1964. I might mention that our E.F.T.A. partners are reciprocating by taking similar action in favour of our exports to them.
Clauses 4 and 6, dealing with the match duty and home brewing of beer, were both foreshadowed by my right hon. Friend, and I do not think that I need say anything more at this stage.
Clause 5 provides for the abolition of the television licence duty as from 1st October next. As hon. Members will know, the duty is £1 out of the total of £4 paid for the television licence. Here again, there is little I need add to what my right hon. Friend said in his Budget speech. The abolition of the £1 duty—coupled with a simultaneous £1 increase in the basic licence fee—will avoid the necessity of any increase in the immediate future of the actual cost of the television licence to the viewer. If my right hon. Friend had not taken this course an increase would have been inevitable.
Clause 7 repeals the existing system of tobacco dealers' licences. The whole purpose of that licensing system was to protect the Tobacco Duty. The reason for the repeal is a simple one. The system is no longer required by the Customs and Excise authorities. This change does not alter in any way other controls for the sale of tobacco, and it maintains the existing powers of search of tobacco dealers' premises. Abolition of the present system will, incidentally, enable tobacco to be sold from mobile shops—a change which hon. Members on both sides of the House, representing rural


areas, have sought for a number of years. I would only add that the existing licences, held in respect of about 430,000 fixed premises, have been issued virtually automatically for quite a long time.
Clauses 8 and 9 deal with minor matters of Customs and Excise machinery. Clause 8 extends the circumstances in which an analyst's certificate about a sample of oil may be accepted as evidence in proceedings concerning the evasion of duty on vehicle fuel. But this can happen only if all parties to the proceedings consent. Clause 9 supplements and modernises the powers of Customs and Excise to cater for the growing development of pipelines, and will be of real value to pipeline operators. The purpose is to allow the conveyance of dutiable goods by pipeline, under bond. without their having to bear duty in advance of entering the pipeline.
I now come to the Income Tax provisions in Part II of the Bill. Clause 10 imposes the Income Tax charge for 1963–64, and Clause 11 prescribes the Surtax rates for 1962–63. Clause 12 introduces the changes in personal reliefs and allowances. This covers increases in the married allowance, the single allowance, the wife's maximum earned income allowance and the changes in the reduced rates of tax, increases in the child allowance, allowances for National Insurance contributions, the income limits for old age relief, for small income relief, for age exemption, and for dependant relatives. Like the charge to Income Tax and Surtax, these personal reliefs are of almost universal interest and importance, but they are well understood, and I do not think that the House would wish me to go over the details this afternoon.
Clause 13 introduces a reform of the child allowance provisions which will take effect from next year—1964–65. At present, if the child's income exceeds the statutory limit—in future to be £115 a year—the parent loses the child allowance, however small the excess may be. In future this "all or nothing" rule will cease to apply; instead the allowance otherwise due will be reduced by £1 for each £1 by which the child's income exceeds the limit.
This is a reform which has long been advocated by hon. Members on both sides of the House. No one doubts the

equity of the proposal, but the difficulty has been the, heavy administrative cost of introducing a tapering provision. To some extent we shall be able to reduce this burden by preparatory work for P.A.Y.E. this autumn. We regret only that the tapering provision could not be made operative this year, 1963–64. However, my right hon. Friend was determined that this reform should be introduced, and, by this Clause it will become operative in 1964–65.
I now come to Chapter II of Part II, which sets out the new scheme for taxing rents and other income from real property. It is a ghastly thought that the abolition of Schedule A involves no less than 19 Clauses and several Schedules, the purpose of some of which is not immediately apparent to the uninitiated. The trouble is that the scheme of taxation of land, which we inherited from the last century, consisted in determining the annual value of land and then imposing tax on that amount. The tax was usually collected from the occupier and he, if he was a tenant, passed it on to his landlord by deducting it from his rent, and so on up the scale.
In this way the tax burden was allocated between those who had an interest in the land, without the need for the Inland Revenue to make separate assessments on them all. The relief that is being given to owner-occupiers involves the abandonment of this system and its replacement by a charge on income derived from land.
Of course, once one is dealing with the concept of money income from land, one inevitably becomes involved in all the multifarious devices that an astute mind can devise to conceal the real position. For example, it becomes necessary to tax premiums because if they were in all cases treated as capital payments, that would obviously afford a simple means of avoiding income payments. There are other ways in which financial benefit, being derived from the ownership of land, can be concealed if there is a tax advantage in doing so.
It also becomes necessary to lay down rules regarding the set-off of expenses on one property against receipts from another—the carry-forward of "losses", and so on—with safeguards against abuse, all of which makes the legislation somewhat complicated. We have tried,


however, to keep the scheme as simple as possible and, in fact, the computation of liability in the ordinary case is unlikely to be particularly complicated.
It must also be remembered, on the other side, that the original simplicity of the Schedule A charge had become very much lost when the values used for Schedule A purposes ceased to be true values and the whole paraphernalia of charges on excess rents had to be devised. Placing a charge on income from land has, at least, enabled us to get rid of a whole lot of the complications in the code which were associated with the need, where land was held for profit, to correct the unreal nature of the Schedule A assessments.
I now turn to the actual Clauses, and I will be as brief as I can, although it is not easy, when dealing with this subject, to be both concise and lucid. Clause 14, the first of these Clauses, abolishes Schedule A and brings rents within a new Case of Schedule D. However, as my right hon. Friend said in his Budget speech, the whole of the administrative changes cannot be carried out this year. Therefore, while the tax on owner-occupiers will be abolished with effect from 6th April this year, Clause 20 provides that Schedule A will remain for 1963–64—but only to the extent that rent is payable in respect of a property.
Where a property changes hands during the year, with the result that it is owner-occupied for part of the year and rented for the other part, appropriate adjustments will be made in the Schedule A liability and the tax will be recovered from the person who ought to bear it. In certain cases this may be an owner-occupier, if, during the year, he had bought his house from a landlord and, in accordance with the usual practice, was given allowance in the purchase price for the Schedule A tax for the part of the year during which the house was owned by the landlord. Clearly, owner-occupiers will not be able to make maintenance claims for 196364 because maintenance claims can only be made against Schedule A, and they will no longer pay Schedule A tax, except amounts which they can recover by deduction from ground rents and
Feuduties.

Mr. Donald Wade: Many owner-occupiers are anxious to know after what date expenditure incurred on repairs will cease to be available for a maintenance claim in respect of Schedule A already paid.

Mr. Barber: The position, as I understand it, is very simple. After my right hon. Friend's Budget, no further Schedule A tax will be paid by an owner-occupier apart, as I have said, from these comparatively minor items; ground rents, feu duties, and so on. As, therefore, no further Schedule A will be paid, then, obviously, no maintenance claims can possibly be made against Schedule A tax.
Landlords will not be able to make maintenance claims in respect of tax which they can recover by deduction from any head rents which they pay. Landlords will, however, be able to make maintenance claims for 1963–64 as respects rented properties. Where an owner-occupied property is part of an estate which is a geographical unit and has been treated as a unit for maintenance claim purposes in the past, the owner can continue, for 1963–64, to bring his expenditure on the owner-occupied property into the computation of his maintenance relief for the estate, if he also brings in its annual value at current figures and not the old Schedule A value. This principle also applies to the computation of liability for the years after 1963–64.

Mr. G. R. Mitchison: The hon. Gentleman has twice given instances of houses and has referred to estates. Am I right in supposing that all these provisions also apply to owner-occupied shops, offices, and so on?

Mr. Barber: Yes. The provisions apply to all owner-occupied property.
Under Clause 21 maintenance claims for 1963–64 on rented properties acquired during that year will be based on the expenditure of that year, and tile taxpayer may also elect to make his maintenance claims for 1963–64 on his other rented properties on the same basis instead of on the five-year average, but this must apply to all of the properties. He will not be able to pick and choose between his different properties.
The taxation of rents for 1964–65 onwards is provided for in Clauses 15 to 19. Clause 15 charges under a new Case VIII


of Schedule D income from rents, rent charges, feu duties and other receipts arising to a person from the ownership of an interest in or right over land in the United Kingdom and from incorporeal hereditaments there.
Case VIII income will be assessed directly on the recipient. From 1964–65, the general rule will be a charge on current year's rents less the current year's expenses. Where a landlord elects to have his 1963–64 maintenance claim dealt with on a current year basis, this rule will be absolute. But in other cases a landlord will be allowed, if he so elects, to take as his expenses for the year 1964–65 to 1967–68 as his average expenses of the previous five years. He can change over to the current year basis whenever he likes, within this period, but once he has changed he must stay on the current year basis. After 1967–68 the deduction for expenses will be put on a current year basis in all cases.
Liability on a current year basis cannot, of course, be accurately fixed till the year is over. Thus, in order to fix a definite liability on which tax is to be paid on 1st January in the tax year, the assessment will be made in the first instance on the assumption that the receipts and expenditure are the same as for the previous years. Where necessary, adjustments will be made by repayment or additional assessment when the year's accounts are received by the Inspector.
Under Clause 16(1) an assessment under Case VIII may be made either where the land is situated or where the owner resides or carries on business. It will, no doubt, normally be convenient to include all the rents of one landlord in one assessment, but if he has separate estates which are managed locally it may be more convenient to have a separate assessment for each estate. The expenses allowed under Case VIII are dealt with in the Fourth Schedule. As a corollary of giving up the Schedule A charge on owner-occupiers, it is necessary to impose a charge from 1963–64 onwards on premiums for leases for periods not exceeding fifty years. As I pointed out earlier, if we did not do this some landlords would simply ask their tenants to pay premiums instead of rents and they would thereby escape tax on their receipts. Clause 22 deals with this point and also with certain other related matters.
Part of Clause 22 and Clauses 23, 24 and 25 contain mainly provisions against possible forms of tax avoidance. Some of the provisions in these Clauses look complicated, but that is inescapable in dealing with these matters. I can tell the House that these provisions are not likely to apply in the ordinary straightforward case.
Clause 25(1) and the Fifth Schedule provide relief to the landlord who is an individual where the inclusion as the income of one year of premiums or similar receipts from a lease which runs for a number of years has the effect of pushing up his rates of tax.
I have referred to the main provisions relating to Schedule A and Case VIII of Schedule D which is to replace it from 1964–65. There are, however, some assessment provisions which I will deal with as briefly as possible. Clause 26 restores the practice which existed until 1948 under which rents and royalties from sandpits, gravel pits and brickfields are payable under deduction of tax.
Clause 28 abolishes the charge under Schedule B except for commercial woodlands where the occupier has not elected for Schedule D assessment. The abolition of Schedule A makes it necessary to provide some new machinery for arriving at the annual value on which the Schedule B assessments are based. This is because Schedule B assessments have hitherto been arrived at by reference to Schedule A. I can say, however, that, in general, this is not expected to result in any material change on the actual amounts of the Schedule B assessments on commercial woodlands. The existing law concerning the taxation of commercial woodlands remain unchanged, apart from a narrow proposal in Clause 46, to which I shall come later and which is concerned solely with those persons or companies who are taxed as dealers in land.
Clause 29 contains consequential provisions, arising from the abolition of Schedule A, about the taxation of business profits. Subsection (1) provides that from 1963–64. onwards the annual value of owner-occupied business property shall not be allowed as a deduction in computing profits. The reason is that there will be no actual outgoing and that deduction will no longer be balanced by a Schedule A assessment. Subsection (2) is merely a transitional provision dealing with


traders who pay long lease rents and feu duties under deduction of tax.
Subsection (3) allows the trader who has paid a taxable premium for his premises to deduct as a trade expense for tax purposes over the period of the lease the same amount as is taxable in the hands of the lessor. This is obviously a sensible and fair arrangement. Subsections (4) and (5) deal with the treatment of premiums taxable under Clause 22 in computing the profits of dealers in property.
Clause 31 preserves the right of owner-occupiers to relief for the interest element, which is taken as five-sixths, in tithe redemption annuities by setting it against general Income Tax instead of against Schedule A.
The purpose of Clause 42 and the Eighth Schedule, which is related to it, is to give relief to approved housing cooperatives and their members on the footing that they are collectively owner-occupiers. I am sure that this will be welcomed by the whole House. The effect is simple. It is broadly that the rents paid to the co-operative by its members will be ignored for tax purposes and will therefore not be taxed as income of the society and that payments by the co-operative of mortgage interest will be treated in proportionate amounts as payments by the members.
I come to Chapter III of Part II of the Bill, which contains the proposals for changes in capital allowances. Clauses 33, 34, 35 and 36 all give effect to the improved scheme of capital allowances which my right hon. Friend announced last November, together with the further improvement in the general scheme of annual allowances which he announced in his Budget speech. The changes all apply to capital expenditure incurred after 5th November, 1962.

Mr. John Diamond: Will the Minister tell the House what is to happen to all those businessmen who have incurred expenditure on the basis of the promise made by the right hon. Gentleman if the House does not pass these Clauses?

Mr. Barber: If the hon. Member will use his usual good offices and powers of persuasion he will ensure that the House will pass the necessary provisions. At all events. they were well received. and I

shall be surprised if hon. Members, certainly on this side of the House, vote against them.

Mr. A. P. Costain: Will my hon. Friend confirm or deny that under the Clause it is essential when plant changes hand that the purchaser of second-hand plant should know the date of the original purchase? Will he have to have machinery to enable that to be done?

Mr. Barber: I should not like to answer that question "off the cuff", because I am not clear what my hon. Friend means. I will look at what he said and consider it. If he would like to write to me and to elaborate it, I will see that it is dealt with.
Broadly speaking, as the House knows, except in the case of ships, the law at present provides for an investment allowance of 20 per cent. for new plant and machinery generally, new mining works and new buildings provided for scientific research. The Bill increases this to 30 per cent, in respect of capital incurred after 5th November. The investment allowance for new industrial buildings and structures, new farm and forestry works and dredging expenditure is to go up from 10 per cent. to 15 per cent. These changes are effected by Clause 33.
Clause 34 doubles the annual allowance for capital expenditure incurred after 5th November, 1962, on new industrial buildings and on dredging. Instead of 2 per cent. it becomes 4 per cent.
Clause 35 lays down new rates of annual allowances for capital expenditure on new plant and machinery incurred after 5th November, 1962. In place of the present system of annual allowances at various rates, there will in future be only three rates—15 per cent., 20 per cent. and 25 per cent., subject to the preservation of existing higher rates in a few cases. I should perhaps explain that existing rates below 15 per cent. are increased to 15 per cent.; that rates between 15 per cent. and 20 per cent. are increased to 20 per cent.; and that rates below 25 per cent. are increased to 25 per cent.
If a new rate has to be determined for a class of machinery or plant in the future, then plant with a normal life of eighteen years or more will get a rate of 15 per cent., that with a life of less than eighteen


but not more than fourteen years will get 20 per cent., and that with a life of less than fourteen years, 25 per cent. This merely expresses in terms of years and rates for new classes of machinery or plant the effect of the proposals for existing classes. These changes are not only an incentive to modernisation, but are also a step in the simplification of the Income Tax code.
Clause 36 provides for writing off capital expenditure on scientific research wholly in the first year. This means that with an investment allowance of 30 per cent., capital expenditure on buildings, plant and machinery provided for scientific research will attract an allowance equal to 130 per cent. against the profits of the year in which it is incurred.
Clause 37 deals with the relief from tax which will be given in respect of the capital expenditure incurred by an operator of a mine or quarry in the United Kingdom in acquiring the source of minerals which he is to work. Here again, my right hon. Friend and the Inland Revenue have been able to devise a scheme which I know will give great satisfaction not only to the industry, but also to hon. Members on both sides of the House, who have been pressing for this relief for a good many years.
As this relief is quite new, I owe it to the House to explain how it will work. Under the Clause, a person who, on or after 4th April this year, works a source of minerals in the United Kingdom as part of his trade will be entitled to relief from tax on his capital outlay in acquiring that source. The relief will be spread over the years during which the mine is being worked and, as regards expenditure incurred after Budget day, will amount in total to the net cost of acquiring the source—that is to say, the initial outlay less the proceeds of sale or compensation received in the course of working and after taking into account any residual value in the site when the operator has ceased to work it.
The relief will be given in much the same way as the capital allowances for plant and machinery, industrial buildings, and so on, partly by way of annual allowances and partly by a balancing adjustment at the end of working. The operator may claim an annual allowance from 1963–64 onwards, and this

will be calculated by reference to the output from the source in his accounting year which forms the basis for the tax assessment and will be a prescribed fraction of the royalty which he would have expected to pay if, instead of buying the source outright, he had obtained a lease.
As regards post-Budget acquisition, the annual allowances will continue until they amount to his original outlay or he ceases to work the source. When he stops working the source a calculation will be made of the net cost to him of the source and this will be compared with the total annual allowances he has been given. Any deficiency of allowances will be made up and any excess will be recovered. Relief will be available for expenditure incurred in the past Is well as in the future, but, where the source was worked before Budget day this year. the relief will be restricted to that part of the output extracted afterwards.
Clause 38, again, is concerned with a novel proposal—the system of free depreciation for capital expenditure incurred after Budget day on new plant and machinery provided for industrial purposes in the development districts and in Northern Ireland. This new incentive has rightly been hailed as a move of major importance to help the districts of high and persistent local unemployment. Because of its obvious importance, the system was fairly fully explained during the Budget debate and I want, therefore, to clarify only one point.
The Clause deals with the situation which may arise when particular districts cease to be development districts. In the first place, a trader who has installed plant and machinery in a development district may have chosen not to take the full depreciation available to him all at once, and the district may cease to be a development district before he has taken it all. In such a case, he will still be able to claim the benefit of the free depreciation provisions if they would otherwise be due. Further, a trader may have committed himself irrevocably to expenditure on plan: and machinery for use in a development district and the district may cease to be a development district before it is installed or paid for. The Clause will ensure that he does not lose his title to free depreciation in that situation.
My right hon. Friend's proposals for free depreciation extend also to new mining works in development districts, and Clause 39 provides for that on the general lines of the preceding Clause.

Mr. Selwyn Lloyd: May I ask a question about Clause 38 and in connection with overspill areas, which are linked to but outside development districts? Under the new Local Employment Act, I understand, these areas are placed on the same basis as the exporting districts. Will the same happen under the Bill in respect of the new depreciation allowances?

Mr. Barber: My right hon. Friend the Chancellor of the Exchequer will deal with that point in winding up the debate. I hope that my right hon. and learned Friend will forgive me if I do not deal with it.
Clause 40 deals with a matter which we considered at length during the passage of the 1961 Finance Bill. It relaxes the restrictions introduced in 1961 on the tax allowances for business cars costing over £2,000. The broad effect of the 1961 provisions, as the House remembers, was to limit the allowances due to those appropriate to a car costing £2,000. Clause 40 introduces a different system, which limits the first year's allowances for a car to £1,100 and the annual allowances in subsequent years to £500.
In comparison with the restrictions introduced in 1961, therefore, the new scheme will give no more allowances in the first year but, thereafter, instead of the total allowances being limited to £2,000, relief will be given by reasonable stages up to the full net cost of the car, provided it is kept long enough.
The reasoning behind the Clause is that tax allowance for cars over £2,000 should be regulated by reference to the length of period over which the car is used. It has become clear—and I think that my right hon. and learned Friend the Member for the Wirral (Mr. Selwyn Lloyd) will agree—that the restrictions introduced in 1961 have hit the manufacturers of top-quality cars harder than was expected. The Clause ensure that manufacturers, such as Rolls-Royce, who have an unrivalled reputation for quality will not be placed in an unfair position in relation to other manufacturers—

Mr. Harold Lever: Since the man who buys an expensive car will pay a higher rate of tax if he keeps it for only a year or two, or a lower rate if he keeps it for seven or eight years, are we to assume that the Government's desire is that businessmen should keep their cars for a greater length of time if the cars are expensive, and part with them rather more speedily if the cars are inexpensive, because no such penalty or incentive is granted in the case of the less expensive car?

Mr. Barber: No, that is a misunderstanding of our object. There are really two broad reasons for this change. The first is that it has been shown—one has to admit it—that the 1961 legislation has worked out unfairly as between the top-quality expensive car and the cheaper car which, naturally, because it is cheaper, does not last as long and is changed more often. The second reason for the proposal in this Clause is that the earlier legislation hit the manufacturers of top-quality cars harder than my right hon. and learned Friend expected when it was introduced, and I do not think that he will mind my saying that before he left the Treasury he was considering amending that part of the Finance Act of 1961, There is really no more to it than that. Perhaps I should mention that it is also necessary to amend the 1961 rules about hired cars, and this the Clause also does.
There remain a few other Clauses amending the law relating to Income Tax. The purpose of Clause 43 has not so far been explained, so I should say something about it. It deals with a point relating to overseas trade corporations. As hon. Members know, a parent company, a holding company, which has no trade of its own can get itself recognised as an overseas trade corporation if it has one or more trading subsidiaries that are themselves overseas trade corporations, but it is at present disqualified if it has any subsidiary that is resident in the United Kingdom and is not an overseas trade corporation.
It has been pointed out to us that an overseas trade corporation may be forced by circumstances to cease trading, with the result that not only will it cease to be an overseas trade corporation itself, but the holding company will be disqualified, too. In that event, tax will


become payable on the whole undistributed balance of the parent's exempted income, and this could be a most serious financial penalty to arise purely by accident. This disqualification will now be removed.
Clause 44 alters the rules for the assessment of profits of trades and professions when a trade or profession ceases or is treated for tax purposes as ceasing. Under the present rules, the profits assessable for the year of assessment in which the trade or profession ceases are the actual profits of that year itself. This will not change. But there is also a provision enabling the Inland Revenue to review the assessment for the penultimate year, and to take the amount of profits arising in that year itself as the measure of the assessment for that year if they are greater than those assessable on the normal preceding-year basis.
The Clause enables the Inland Revenue to extend this review a year further back to cover the assessments not only for the penultimate year, but also for the year before that. If the actual profits of both years taken together exceed the profits assessable for both years taken together on the preceding-year basis, the Inland Revenue will adjust the assessments for both years to the actual profits of each. In some cases, this may benefit a taxpayer, but I should say that the main object of the proposal is to limit the opportunities for avoidance. The change will apply only to cases where the cessation takes place in 1964–65 or a later year.
Clause 45 provides for changing under Schedule E the annual value, at current figures, of premises in the United Kingdom that are available to the occupier because he holds an office or employment. Up to now, such an occupier has been assessed under Schedule A and, because he paid no rent from which tax could be deducted, has had to bear it himself. With the disappearance of Schedule A on beneficial occupation it is necessary to put a direct charge on what is, in truth, an emolument of employment. The Clause does not extend to farmworkers in tied cottages and other so-called "representative occupiers", whom the law does not regard as occupiers because they are required to live in the premises for the proper performance of their duties.
I referred earlier to Clause 46. This covers a device under which relief for expenses on commercial woodlands can, in effect, be claimed twice over where a dealer is involved. In the first place, the occupier can get relief by electing for Schedule D and treating the expenses as trading losses in so far as they exceed his current receipts from the woodlands. But then, if he sells the woodlands to a dealer in land, the dealer treats as a trading expense the price he paid for the woodlands. This, of course, largely represents the value of expenses incurred by the vendor, who has already had relief on them. Under this Clause, the value of the timber will be disregarded in arriving at the dealer's admissible expenditure but a corresponding allowance will be given to him if he later sells the land with the timber still standing.
I do not think that I need refer to Clauses 47 and 48 at this stage—

Mr. Frank Bowles: The Financial Secretary must have noticed in the newspapers week after week accounts of actors going bankrupt, and owing the Inland Revenue large sums of money. I believe that Robert Newton owed about £100,000 in that way, and another actor who died recently owed the Inland Revenue a great deal of money. Is there anything in this Bill to ensure that the proper tax is deducted by actors' employers, or in some way, to prevent these large sums of money from being lost each year?

Mr. Barber: I thought that the hon. Gentleman was about to refer to commercial woodlands. Obviously, the sort of cases he has in mind, which we all know do occur, are of considerable concern to the inland Revenue. If he would like me to, so as not to delay our proceedings new, I will write to him to explain why I think that the Inland Revenue has all the powers it needs for dealing with that sort of case. But it is inevitable that, now and again, there will be tax avoidance or tax evasion. However, I should like to write to the hon. Gentleman explaining what I have in mind when I say that the Inland Revenue has very considerable powers in these cases.

Mr. Bow][es: I am most grateful.

Mr. Barber: Next, there are three Clauses concerned with Estate Duty. Clause 49, which really explains itself, increases the exemption limit from £4,000 to £5,000, and adjusts the rates for estates up to £8,000. Clause 50 deals with the exemption for gifts, including settlements, made in consideration of marriage. As I think every hon. Member knows, we have for many years had an exemption for these gifts and, until recently, nobody thought that there was anything wrong with it. As Mr. Lloyd George said when it was introduced, nobody could make his son get married to avoid duty because the son would think the penalty too high. My right hon. Friend has already explained the purpose of this proposal, and I would only add that the Clause simply tries to formulate the practice that had always been accepted until a case came before the courts recently.
Part IV deals with Stamp Duty. Clause 52 and Part I of Schedule 9 prescribe the new rate of duty on conveyances and transfers of all kinds of property, including both houses and stocks and shares. The rate will, in general, be 1 per cent. of the consideration for the sale; that is, half the present rate. The Clause also extends the relief for small purchases of property other than stocks and marketable securities—mainly houses. These are at present exempt from duty where the consideration, including the consideration for any associated transactions, does not exceed £3,500, and reduced rates of duty apply up to £6,000. Under the Bill, purchases of houses costing up to £4,500 will be exempt from duty, and duty at per cent. will be payable when the price falls between £4,500 and £6,000. Above £6,000, the full rate of duty will remain payable, but this will, of course, be 1 per cent. instead of 2 per cent. as in the past.
Part I of Schedule 9 improves the graduation of the Stamp Duty for small purchases of stocks and shares where the consideration falls between £25 and £80. For the convenience of everyone concerned, the scale has to be set out in a series of steps, and this at present has the result that in most cases the duty payable is somewhat above the percentage rate. For small transactions the difference can be relatively quite big, and the new scale will, I hope, do something to remove a grievance that is some-

times felt by purchasers of small holdings of shares.
The provisions which immediately follow Clause 52 are all concerned with more specific Stamp Duty matters. Clause 53 deals with leases, Clauses 54 and 60 with mortgages, and Clause 55 with various transitional provisions. Clause 59 is concerned with Stamp Duty on Commonwealth Government stocks. I will willingly deal with these Clauses if the House wishes, but it seemed to me that discussion might be better left to the Committee stage. I should make one point clear. There is no intention that Stamp Duty should be imposed on new issues or rights issues on allotment letters of British companies. All the Stamp Duty changes to which I have referred will come into operation on 1st August, which is the usual date for Stamp Duty changes.
I hope, again, that the House will acquit me of discourtesy if, at this stage, I do not deal with Clauses 62, 64, 65, 67 and 68. They were either referred to by my right hon. Friend, or are favourable to the taxpayer, or save unnecessary work, or, more rarely, I regret to say, are self-explanatory.
I should, however. say something about Clause 66. This provides for the renewal for two years of the power to make Exchequer advances to the gas and electricity industries under Section 42 of the Finance Act, 1956. This is necessary, because the most recent extension of the power to make these advances—namely, Section 78 of the 1960 Finance Act—expires at the end of August this year. Hon. Members will wish to know that the proposed renewal follows closely the form adopted in 1960.
The House will appreciate that the global limit of £3,280 million which is proposed for advances up to the end of August, 1964, is a cumulative aggregate limit. It includes about £420 million of new advances to the electricity and gas industries estimated for the year up to the end of August, 1964. As before, no limit is prescribed by the Clause for the second
year which it covers, because it was not possible to estimate requirements with sufficient accuracy so far ahead. The second year's limit will, therefore, be set by an Order subject to affirmative Resolution of the House.
This Bill contains a number of major proposals, some of them involving new principles, but the merit of many of them w ill not, I think, be in dispute. In the knowledge that my right hon. Friend's Budget has been generally applauded throughout the country, I commend the Bill to the House.

4.40 p.m.

Mr. Douglas Houghton: The Financial Secretary to the Treasury took the unusual step of opening his speech by making some kind remarks about my hon. and learned Friend the Member for Kettering (Mr. Mitohison) and myself before we had made our speeches. I hope that it was not a gracefully subtle move to take the sting out of any criticisms that I may make in my speech. The hon. Gentleman is justly proud of his long run at the Treasury and we congratulate him on his survival so far, but is it not surprising that any Minister who sponsored last year's Finance Bill should be moving the Second Reading of this year's Bill? Has the hon. Gentleman no explanation to offer, no resignation speech to make?
It seems to me that although the hon. Gentleman is riding under the same colours he has now a different trainer and a very different horse. In fact, he is running in a different race. Last year it was on the flat and this year it is aver the sticks, but from what we have Seen of the hon. Gentleman's performance this afternoon the Minister of Transport must be very envious. The Financial Secretary has made a very Full and lucid explanatory speech on the Bill, the sort of speech which might well have been circulated in the OFFICIAL REPORT, or published beforehand as a White Paper.
Last year we had the innovation of a White Paper on the short-term speculative gains tax. It would have been very helpful to the House today if we had had an explanation of the 12 or 19 Clauses dealing with the abolition of Schedule A and all its consequences, because it is obvious that there can be no such Clause in the Finance Bill as Let there be no more Schedule A".
I want to cover a broader canvas, however, in what I have to say about the Bill. I feel that the contrast between

this Bill and last year's Finance Bill is too remarkable to pass without brief comment. Last year, the Finance Bill increased taxation by £290 million. This year's Bill gives tax reliefs amounting to £270 million. Last year, Purchase Tax on clothing, bedding, footwear and most domestic furniture was raised from 5½ per cent. to 10 per cent., the highest rate an these essential articles since 1955. Confectionery, ice-cream and soft drinks, previously exempt, were taxed at 15 per cent. to bring in about £30 million of extra revenue. The tax on oil, including heavy oils for public transport and industry, was raised to bring in another £60 million. The tax on beer, raised by the regulator in July, 1961, was made permanent last year at the higher rate.
All these tax increases of last year stay as they are. This Bill does not reduce a single one of them. While Purchase Tax on television sets, motor cars, perfumery and cosmetics has been slashed by nearly half since last year, the tax on clothing and footwear remains the same; and this is the second largest revenue producer in this field of taxation, with £45 million in tax on clothing alone. To those who might wish to feel a special sense of grievance about this, I suggest tha the beer drinkers, or the children's pocket money, or the parent's clothing, are paying for the abolition of Schedule A this year.
The contrast between this year's Bill and last year's Bill, however, is more than the differences in taxation. The whole economic philosophy has changed. This Bill is not only in contrast, it is a sharp contradiction a of last year's Bill. It starkly reveals the humbug of the Prime Minister's assurances to the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), when dismissing him, that his policies would be pursued. One reason why the Government are heading for disaster is that all tog frequently they do not tell the truth. Another reason is that even when they are trying to be honest with the House their massive self-deception and blatant contradictions make them appear shifty, unstable, opportunist and quite incompetent. People in the country notice this, and much of the disapproval of the Government which I hear among their own erstwhile supporters is on this very score.
I invite the House to reflect on the speeches of the then Chancellor of the Exchequer and the Financial Secretary on Third Reading of the Finance Bill on 6th July, 1962. It seems incredible today that they were still sticking to their story that last year's Finance Bill was laying the base for a steady increase in production and consumption throughout the year ahead without the renewal of the balance of payments difficulty.
A Conservative pamphlet, "The Budget of 1962", which is still obtainable, by the way, had declared in defence of the then Chancellor, on page 15:
Our post-war experience has shown that to stimulate borne demand is no short cut to long-term growth, and with an average level of 2 per cent. unemployment and no general reserve of labour, soon runs us into balance of payment difficulties, to correct which fresh restrictions have to be imposed.
Referring to Opposition criticism, the same pamphlet stated, in 1962:
It is clear that … both of the other Parties meant that the Chancellor of the Exchequer should have made larger reductions in taxation to stimulate home demand. Indeed. Mr. James Callaghan, the Socialist Shadow Chancellor, speaking in the Budget debate, proposed various reductions in taxation or increases in expenditure which amounted to £500£700 million a year.
How dare my hon. Friend anticipate by a few months exactly what the new Chancellor was going to do? What is Socialist irresponsibility one moment is sound Government policy the next.
The Third Reading of the Finance Bill last year was on Friday, 6th July. On the following Friday, before the cement was dry on the sound base for future expansion, the master mason had gone—sacked.
That phase of the battle is over.
cynically declared the Prime Minister in the House on 26th July:
We have achieved a sound basis for growth and we must confirm that and move to a new phase. I have decided that for this new phase there must he some new commanders."—[OFFICIAL REPORT. 26th July, 1962; Vol. 663, c. 1752.]
This is where the new Chancellor of the Exchequer came in.
The result? Rarely if ever has a Finance Bill contained so much, in direction and detail, that the Opposition unsuccessfully pressed on the Government last year. "Ah", said the

Chancellor of the Exchequer on 9th April:
…if someone backs every horse in the race he is certain to get the winner."—[OFFICIAL REPORT, 9th April, 1963; Vol. 675. c. 1216.1
Of course, but what the Chancellor overlooked is that some of the winners this year were the also-rans of last year. Indeed, they were not even in the stud book, and now they are safely past the post and in a paddock of their own called Part II, Chapter III in this Bill, "Capital Allowances".
These Clauses in Chapter III are no conventional tax reliefs like wife, children, reduced rates or even standard rate. They bring about a major change in the use of taxation as an instrument of economic policy. We were voted down on two of them less than a year ago. Discriminatory tax reliefs for investment in local employment areas were rejected by the Olen Financial Secretary after three hours of debate. On 5th June he said:
…I think that we have to realise both the limitations of our tax system and the fact that we can achieve economic progress only by co-operation between the Government and the whole of industry."—[OFFICIAL REPORT. 5th June, 1962; Vol. 661, c. 295.]
How was he to know that he was standing on a trap-door? The new Chancellor, with inside knowledge of what was happening in the National Economic Development Council, decided to anticipate paragraphs 85 and 173 of the Council's second Report entitled Conditions Favourable to Faster Growth.
If the Minister of Education, who was then Financial Secretary to the Treasury and who is now being accused of being arrogant and dictatorial, would like to recover his spirit of humility, he has only to come into the debates in Committee on this Bill and see the Chancellor demolish the highly-polished defences which he, as Financial Secretary, put up last June against Clauses 38 and 39 of the present Bill. These Clauses are admittedly a new and bold innovation. They give preferential capital allowances to firms in one area while not to those in another, solely on the ground of the marginal difference in the level of unemployment locally. This is justifiable on social grounds and also on economic grounds. We on this side of the House strongly urged it last year. It is, however, an


important departure from all the canons of taxation in this country for 100 years.
I never despise the purist in taxation matters. Otherwise, I should not be described by the Chief Secretary as "a dignified but solitary mourner" at the burial of Schedule A. But it is perhaps worth spending a moment on this point. I think that, in general, it is better for a subsidy to be called by its proper name and to be clearly seen for what it is. A ploughing grant, for example, or a lime subsidy, is preferable to giving tax relief on these activities.
But the reason why the proposals in these Clauses are sound in principle from a fiscal point of view is that existing features of our tax system are varied, extended and made more flexible for reasons of social and economic policy, and that I believe to be within the legitimate uses of taxation in present conditions. This comment may pave the way to subsequent debates, Amendments and new Clauses on these matters. The atmosphere this year may be more cordial and more receptive than last year.
Going back to Part I—Customs and Excise—we shall certainly wish to debate the whole range of indirect taxation, including, in its proper place, Purchase Tax. As I have already said, none of the taxes put up last year has come down this year—not one; nor have any of the Customs and Excise duties, which were increased by the regulator in July, 1961, and confirmed at a higher level in last year's Finance Act. It may be that the Chancellor feels inhibited from reducing the lowest rates of Purchase Tax while he is still uncertain which way indirect taxation is going. The wider use of indirect taxation has some powerful and persuasive advocates, and not all of them on the other side of the House.
The Chancellor is now seeking advice on a form of turnover tax. Meanwhile, he has found it possible and desirable to slash the higher rates of Purchase Tax, believing, no doubt, that this would have to be done in any case. Purchase Tax on cars and cosmetics has come tumbling down these last two years, while the tax on essential clothing, footwear and furniture has gone up. This may be one of the "signposts for the seventies", pointing to the big political argument about whether, as our standards rise, more of the total tax burden should be shifted

to spending rather than to earning or profit making. All I ask at the moment is that the debate on this matter should be kept free of the delusion that we do not feel the taxes that we do not see, whereas the ones we do see are a mortification of the flesh.
I will now pass to Clauses 10 to 13 —the rates of tax and personal allowances. I have only two comments to make. The first is that I believe the Chancellor is right to give increases in personal allowances this year precedence over a redaction in the standard rate. What I am not very happy about is the recasting of the reduced rates of tax in the manner proposed. The purpose of the change we fully understand, of course. The last tine that personal allowances were improved a similar device was adopted to withhold the full benefit of the increases from the higher incomes.
Nevertheless, a lower rate of 4s. is a steep beginning. Pay increases and overtime tax at 4s. in the £, even after earned income relief, is still 3s. 2d. in the £, and that is more than double the lower rate of tax on the first £60 of taxable income at present. It is not enough to say that everyone will pay less tax than they do now. People who pay no tax now and who come into the net later will undoubtedly grumble about the lowest rate of tax being as high as 3s. 2d. in the £ net.
The second point on these Clauses is to draw attention to omissions from the personal allowance increases. I quote a housekeeper as an example. Even the relief for blind persons, given as recently as last yea', was decided in the context of the structure of the personal allowance as it was then. We shall be tabling Amendments on these matters, and we shall also be examining critically the proposals for age exemption and other reliefs.
Part Chapter II is all about the abolition of Schedule A. My hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) last year urged the Chancellor not to dismantle the structure of this tax, but to deal specially and separately with the exemption from the tax of owner-occupiers. The present Chancellor has decided to make a clean sweep of the whole shambles of Schedule A. He does not exempt the owner-occupier from tax so much as leave the


owner-occupier out of the tax altogether. Schedule A as a tax ceases to be. It is reincarnated as Case VIII, Schedule D, for the purpose of taxing rents and other profits from property.
I have no doubt that there will be many questions arising on these Clauses in Committee, and I do not wish to delay the House by going into them in detail now. I have not the slightest doubt that when the time comes we shall have some exciting debates on Chapter II. The benches opposite will be crowded with transient phantoms, all there to defend the property interests, and a good time will be had by all.
In the meantime, I wish to say quite definitely that I do not accept the view that to tax the annual value of an owner-occupied house has always been wrong. It has lasted for 100 years. That does not make it right, but abolition does not mean that it has been wrong from the beginning. This, apparently, is the latest doctrine from the Front Bench opposite.
The Chancellor in his Budget speech, said:
… I have never believed that Schedule A as a tax on the occupation of houses, rather than on profits drawn from them, is justifiable." —[OFFICIAL REPORT, 3rd April 1963; Vol. 674, c. 457.]
Has he not? Why then has he gone into the Lobby year after year and voted against its abolition? The Radcliffe Commission defended it. The Government of the Republic of Ireland, where it still exists on the British pattern, has recently defended it, even against a tax commission which recommended otherwise.
I suggest that we should "come clean" and welcome Clause 14 for what it does, and have no humbug about it. Remove the tax now by all means. But cut out the pretence that owner-occupiers have been robbed for the past 100 years. The former Chancellor got it right when, on the Finance Bill last year, he said that he proposed to do it on social grounds to encourage home ownership.
The Chief Secretary uttered the prevailing incantation of Ministers who have found—as he put it—Schedule A a very unsatisfactory tax, but have never previously said so. When pushed from both sides of the House into doing this, on to the band wagon they go, blowing their

own trumpets as if they had composed the music.
Now a word or two about avoidance. I am surprised that the Chancellor has not dealt with the granting of share options as a form of remuneration. I refer to the case of Abbott v. Philbin, decided in the House of Lords two years ago. This case dealt with tax liability on non-assignable options granted to an employee to take up fully assignable shares at a certain price. The judgment was that the value of the shares was taxable in the year in which the option was granted on the then value of the shares. In most of these cases the option is open for a number of years at the price fixed at the time the option is granted. I saw one recently where the option remains open until 1968 at a price fixed a few weeks ago. That can amount to a tax capital gain on shares for a person who does not, in fact, possess them until he has taken up the option.
I wish to pass to the more general question of tax avoidance. Like other hon. Members I have been studying the latest report of the Commissioners of Inland Revenue. I ask the Chancellor: can he really believe the information given in Table 98 of the 105th Report which shows that there are 1½ million persons in business on their own or in partnership? Of that 1½ million, one-third are shown as having a total income from all sources of less than £10 a week. Who are these people? One wonders what they do.
Here we have ½million self-employed persons whose main source of income is their trading profits and whose total income, including other earnings, wife's income, investment income, property—everything—is still less than £10 a week. How do they do it? It may be so. But I find it very difficult to believe and it may well be a revealing illustration of the difference in tax treatment of those who come under Schedule D, which is virtually self-assessment, and those who are in jobs and come under Schedule E which is Pay-As-Your-Earn.
Now I wish to say a few words about tax reform. I think that too many hopes of tax reform in this Bill may have led to some disappointment. There are many reformers about, some wanting different things. There is no shortage of ideas.
Tax reform, to some, means simplification. To others, if not to most, it means paying less tax. To still others, it means shifting the burden from one section of the community to another. It would take a very long Finance Bill to do even part of what needs to be done and I think that we have to recognise the limitations of the Finance Bill as an instrument of tax reform.
The Bill is the principal revenue Measure of the year and if it is to pass through the House in accordance with any sort of reasonable timetable, its length and complexity must obviously be tailored to meet the amount of parliamentary time which can be given to it. If reforms are controversial, they take up a lot of time, and that is probably why reforms in the past have been done piecemeal. I used to call it tax reform by stealth—a bit at a time.
Had Britain been going into the Common Market in the near future, considerable changes in our tax system would now have been necessary—mostly in indirect taxation—by the requirement to harmonise under the Rome Treaty. Social security contributions would have come into the review, too. But even though our entry into Europe may be delayed, or put off indefinitely, there may be some advantage in having our tax structure in broad harmony with that of our nearest neighbours. The Chancellor's decision to get advice on an added value tax or some other form of turnover tax is, therefore, if I may say so, wise and timely, though I did express surprise that it had not been done before. As I have said, the Chancellor may feel that a reform of Purchase Tax had better wait upon the Gordon Richardson Report. But we believe that he could do something meanwhile, and I have already indicated the direction in which we think he might act.
As the Financial Secretary said, Clause 2 prepares the ground for a possible tax on public gaming establishments. The Chancellor said that he could not tax gaming this year because he did not know where these gaming houses were. When the right hon. Gentleman does know, he will be able to consider the matter further if he is still in office to do so. A modern and expanding society, in which new modes of life are developing and new sources

of private wealth and new and higher standards of living are emerging, must plainly offer new sources of revenue. One has only to think of the supercession of the armorial bearings tax by the motor vehicle tax. Obviously, we cannot stick to the traditional tax structure when change is making some of it obsolete or unfair.
When I went into the Inland Revenue there was an inhabited house duty, and one of the more frequent excursions of surveyors of taxes was to inspect the lock-up shops, because the inhabited house duty was confined to the living portion of the premises only if the shop itself was a lock-up and there was no internal access between the two. Naturally, under such conditions of taxation the premises had to he physically inspected. A labour Chancellor got rid of that nonsense. Under the sheer compelling fore of equity—if hon. Members like—and modern conditions, the Government have introduced a short-term capital gains tax, and have also regarded Schedule A as no longer defensible as a tax on the owner-occupation of houses.
With the steady rise in public expenditure, which not even the right hon. and learned Member for Wirral, in his most fervent rôle of King Canute, could stem, Chancellors will he in urgent need of fresh sources of revenue, and plans to stimulate economic growth will also bring different forms of taxation under review.
Now I come to a point of considerable nervous tension. Now that the National Economic Development Council, under the chairmanship of the Chancellor, has broached the question of a wealth tax, perhaps it can be mentioned in an atmosphere less prejudiced than before. All that my hon. Friend the Member for Cardiff, South-East did was to mention this a few days too soon. Paragraph 170 of its Second Report the National Economic Development Council states:
The introduction of a wealth tax here would be a controversial step but it may have a useful rôle in any major review of taxation related to a programme for growth.
When I read those words I thought that perhaps this was not the Report of the National Economic Development Council, but merely an office document passed through the machinery of the Council. So I asked some members of


the Council, "Is this your Report?" and they said, "Yes". Very well, if the Chancellor is Chairman he must, presumably, take his share of the collective responsibility for mentioning a possible wealth tax as having possibly a useful role in any major review of taxation relating to a programme for growth.
The Guardian, on 3rd May, referring to this paragraph, said:
The fact that it was presented as part of a programme for growth has baffled and irritated some Conservative critics, who apparently regard the tax merely as a Left Wing levelling device.
We on this side of the House are grateful to the Chancellor, as Chairman of the National Economic Development Council, for having cleared my hon. Friend the Member for Cardiff, South-East of any allegation of a partisan approach to this proposal.
I will now risk throwing out—I must not leave to my hon. Friend the sole prerogative of suggesting new taxes—a very mild suggestion of my own. Why not a tax on the sale of pictures, antiques, and works of art? This might enable more generous provision to be made for the arts and the artists who have for far too long been neglected in this country. Elsewhere, in other countries—in France, Italy, Spain and in the City of New York—such a tax is levied on sales by auction only, or, in some cases, on sales both by auction and by private treaty as well. I am quite impressed with the case for such a tax as this, especially when I remember that there is a 10 per cent. tax on a pair of trousers. I suggest to the Chancellor that he might like to think about this.
As for the clearance work to be done in the tax jungle, the Liberal pamphlet, compiled under the able guidance of Professor Wheatcroft, has hacked its way through that. I must give credit where credit is due, even if it is to the Liberal Party. The pamphlet is full of provocative ideas, but I am glad that it does not contain the suggestion that maintenance claims should go on long after Schedule A has been abolished.

Mr. Wade: I am sure that the hon. Gentleman would not want to be misunderstood.

Mr. Houghton: I am sure that the hon. Gentleman would not, either.

Mr. Wade: I do not think that anyone would suggest that maintenance claims should go on long after Schedule A has been abolished, but there is quite a serious problem as to whether expenditure incurred after, say, 31st March, 1962, should be available for maintenance claims in respect of Schedule A tax already paid.

Mr. Houghton: I will not pursue that point now. It should obviously be dealt with in Committee. For the moment, I merely delete the word "long".
I suggest to the Chancellor that as most of the recommendations of the last Royal Commission on the Taxation of Profits and Income, and of the Millard Tucker Committee before it, have now been written into successive Finance Bills, it may be time to appoint another. There is no doubt that some big game hunters should be let loose in the tax jungle, but I will utter one word of warning, which is that not all tax reforms can be accomplished without some people paying more and some less. A recasting of the tax structure is impossible without some comparative grievances of some kind.
To close my remarks, I would say that the big question mark hanging over the Bill is: will it achieve its purpose? It does not, of course, stand alone in the battle for economic growth and higher production. It is, however, of great importance as the principal provider of incentives, and how things go during the summer may decide the date of the General Election and the fate of the Government, if, indeed, both have not been decided already.

5.16 p.m.

Mr. Nigel Birch: We have had a very loud speech from the hon. Member for Sowerby (Mr. Houghton) and, I thought, a very interesting one. I am looking forward to exciting debates on the Finance Bill. I suppose that the hon. Gentleman speaks as a professional bloodsucker, but he seems to strike his fangs into the Finance Bill with all the ghoulish relish of a vampire. He was particularly excited about the tax on cosmetics being reduced. I suppose that he likes a well-scrubbed girl himself, I do not know.
I wish to return from the details of the Finance Bill to the main theme of the


Budget. I should like to make, first, two points on the main Budget debate. My first comment on the Budget debate is about the very large amount of time taken up in deciding which party had guessed worst and attributing political praise or blame accordingly. When the Lord Derby of the day appointed Disraeli to be Chancellor of the Exchequer, Disraeli said, "It is a Department of which I have no knowledge," to which Derby replied, "You know as much as Mr. Canning did. They give you the figures." They still give you the figures.
It is certainly true that our statistical methods have improved, but all that statistics can really do is to give some description of the road we have already traversed and to give only the vaguest hints about the twists and turns in the road ahead. If the statisticians in the Treasury had "foreknowledge absolute," I should rather doubt whether they would waste their time sitting in a chair in an office. So. we cannot know. The only political point is this. On the whole, as that debate went, I think that the Labour Party did slightly worse than we did. The Labour Party when in power believed in planning, had food and clothes rationing, complete control of imports, complete control of building, and, in fact, every single control but still managed to be uproariously wrong. When putting forward various forms of planning and control as a panacea, I think it would be wise to show at any rate some degree of modesty.
On the second point on the debate, I should like to refer to something which the hon. Member for Cardiff, South-East (Mr. Callaghan) said. I do not think that he is here today. He said:
The case is overwhelming. The Chancellor has been too cautious." — [OFFICIAL REPORT, 4th April, 1963; Vol. 675, c. 642.]
In the next three-quarters of his speech the hon. Gentleman insinuated that the Chancellor was endeavouring to bribe the electorate. The hon. Gentleman is improving in double-talk, but, of course, has nothing like attained the level of his right hon. Friend the Leader of the Opposition who always did this on previous Budgets. I do not think that the hon. Member for Cardiff, South-East could have kept a straight face as did the Leader of the Opposition when he asserted in the debate on the Bank Rate Tribunal that his main anxiety had been to save

Miss Chataway from victimisation by the Conservative Central Office. Many of us thought that this was his finest hour. The hon. Member for Cardiff, South-East is not very much older than his right hon. Friend the Leader of the Opposition and, therefore, still has time to improve.
I turn new from the last debate to the main theme of the Budget, and that is the question of expansion without inflation. This, of course, is tied on to the National Economic Development Council's proposal to get a persistent 4 per cent. rate of growth in our economy. We have had frequently in the past a 4 per cent. rate of growth and more, and my guess is that, probably more likely than not, we shall get this year a rate of growth of more than 4 per cent. But what we have not managed to do is to maintain a rate of growth of 4 per cent. consistently. The country which is, I suppose, most analogous to ours, the United States, has never succeeded in consistently achieving a rate of growth of 4 per cent. In the sixty years or so before the First World War, when we were leading the world and expanding rapidly, we did not succeed iii consistently averaging a growth rate of 4 per cent.
It is true that many continental countries have done a good deal better than that over the last few years. But they started from scratch and, in most cases, they have had very large reserves of labour coming from agriculture or, as in the case of Germany, from Eastern Germany. I think that things are getting a little more difficult for them now. Dr. Blessing, the very intelligent Chairman of the German Central Bank, has said that Germany is now suffering from the English disease, by which he means a rising spiral of costs and wages. I understand that the predicted rate of growth for Western Germany this year is only 3½ per cent,
The French are still forging ahead very rapidly, but in the last two years or so the east of living in France has been rising very quickly. I imagine that that one of the main reasons for the recent prolonged coal strike in France. What will happen in France I do not know but, unless something is done, I think that they are forming up for their ninth devaluation since the war.
Therefore, I think that we can say that growth without inflation at the rate of 4 per cent., while theoretically possible, is not something which will happen of itself and that the preconditions laid down by the National Economic Development Council will have to be fulfilled if it is to come about.
Two main preconditions are laid down. The first is that we should have an incomes policy which works, and the second is that our exports should increase fairly quickly and go on increasing all the time. We are not doing too badly on incomes at the moment, and we are doing quite well on exports, thanks very largely to what my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd) did. But there is something rather sinister here, and that is this. Many economists and financial journalists obviously do not believe that the preconditions can be fulfilled. Therefore, many of them have come out in favour of devaluation or a floating pound.
Do not let us have any nonsense about a floating pound. It is no earthly good if it floats in the context of increasing exports. It must sink if it is to do any good. What is in fact meant is devaluation. The main objection to devaluation is that of justice. It penalisers savers, people with money in fixed interest securities, the old, and those in no position to look after themselves.
Another objection—and it is not on moral grounds this time—is that if we play tricks with our currency we shall throw the whole trade of the world into chaos. We are here talking down our own pound. We cannot expect the gnomes of Zurich to bear up the pound on their tiny shoulders if we talk it down. That is asking a lot.
All this was started by Mr. Nicholas Kaldor in The Times. He is a distinguished Socialist economist and, no doubt, the main source for the ideas about the wealth tax put forward by the hon. Member for Cardiff, South-East. He has also given a great deal of advice to many overseas countries. He has quite a niche in history. He advised Ceylon, Ghana and British Guiana and reduced all three of their

economies to chaos. On the other hand, he has some wisdom and sense. Just before the last election, so gloriously won by the Tories, he started an investment trust called "Investing in Success Equities Limited". Coincidentally with starting his devaluation stuff he started another investment trust called "Investing in Continental Growth Stocks Limited". We can therefore say that his mind is very consistent in parts.
But what started off the minor run on sterling just before the budget was a typically schizophrenic product from the blackboard jungle at the Economist. There was an article in it on 2nd March, the first half of which advocated devaluation and the second half of which did not advocate it. In the first half it was said that there was absolutely no moral objection to devaluation, external or internal. It 'never once mentioned the case of any holder of fixed interest-bearing securities. Clearly, anyone who holds War Loan or fixed interest securities is like the Roman slave is to the Economist a res not a persona.
The second half dealt with the main point, which is this. Owing to our banking position and to the fact that we hold the reserves of many other countries, including many under-developed countries, it is very difficult, if not impossible, for us to have a small devaluation. Suppose that a person had a deposit in a bank and the directors of that bank said, "The bank is perfectly solvent, but we think that we should have a more comfortable time if we repaid our deposits at only 19s. in the pound". That would be a devaluation of 5 per cent. What would people say? They might say, "The Economist says that it is moral, so I will leave my money there". On the other hand, they might say, "These fellows are a lot of rogues. I will queue up tomorrow and get my money out".
That is why Sir Stafford Cripps, when he devalued in 1949, was forced to make a major devaluation far beyond that which purchasing power parity required. He made a 40 per cent. devaluation, which was described by many as a trade war rate. He devalued it right down to the lowest black market rate of the pound. He thought, probably rightly, that if he devalued by a smaller amount people


would have gone on trying to get their money out and he would have been unable to pay. On the other hand, if we devalued by an enormous amount people would say, "I have lost so much, therefore my money can stay there. There is no better hole to go to."
The pound is not over-valued. The choice before us is to maintain our currency or Ito devalue at the cost of damage to people who have entrusted money to us and at the cost of chaos in world trade. I cannot think that there is any doubt about the direction in which good sense and honuor lies.
I wish to say a few words on the two main pre-conditions on an incomes policy and on exports. Some progress has been made on an incomes policy. Certainly we can say that members of the public better understand what is at stake today than they used to do. They understand why the National Economic Development Council pitches its target for wage increases at the level which it proposes. The only comment that I would make is this. No wages policy will stand up against an overheated economy. If we get a situation, which we have had so often in this country, where the number of unfilled vacancies exceeds the number of unemployed, and unemployment is right down towards 1 per cent., no kind of wages policy will stand up against it. It is just as true in countries like Holland and Sweden, where they have a fairly highly developed wages policy, as it is here, that no kind of wages policy will stand up against it. Therefore, we cannot afford to push things right up to that point.
Turning to exports, the fact that the Common Market negotiations have foundered does nothing to invalidate the economic arguments put forward in favour of our getting in. The trouble, I think, will arise when internal tariffs of the Six are nil and when their economies are more fully integrated. It is for that reason that so many hopes have been pinned on what is known as the Kennedy Round, on trying to get a general liberalisation of trade, including the Six. The omens for the Kennedy Round at the moment are not very good. We must pray that it does come off, but I think that we should be wise to be clear about what ought to happen if it does not come off. If it does not

come off, I think that it will mean that the Six, under the leadership of France, have decided to be inward-looking, to show European particularism, to be highly protectionist, and not ready to co-operate with the re it of the world in trying to get a great leap forward of all the Western economies. If we are to deal with that situation we have to have some cards.
An interesting suggestion that I saw in The Times on 1st May, which has been made over here several times before, was from a man called Henry Reuss, who is a Congressman from Wisconsin. His line is this. If the Six block progress then the Americans and ourselves and other industrial countries should have an aggressive policy for lowering tariffs between ourselves but we should not necessarily extend those lowered tariffs on the most-favoured nation clause principle to the Six if they do not play, even if this entails some amendment of the G.A.T.T. I would ask my right hon. Friend to consider that. I do not expect him to comment on it because it is not the sort of thing that a Chancellor of the Exchequer ought to comment on at this stage.
I think that my right hon. Friend is on the right lines, but let him be cautious, let him not listen to fools, and let him reflect that probably the Board of Trade in the next year or two will be the most important Department in the Government.

Mr. Mitchison: Can the right hon. Gentleman tell me whether he is in favour of the Second Reading of the Bill or not?

Mr. Birch: If the hon. and learned Gentleman ever listened to a debate on the Second Reading of the Finance Bill, he would know that the general thing to do is to talk on and continue the general debate and not indulge in bloodsucker stuff.

5.35 p.m.

Mr. Victor Yates: The right hon. Member for Flint, West (Mr. Birch) certainly made some rather clever points, but I doubt very much whether he advanced any idea about the main theme of expansion with which we understand that the Budget was supposed to be concerned. If I may say so, although I do not wish to follow him in the points which he has made, I do not think that he rose to his usual level today. The right hon. Gentleman said at


the beginning of his speech that we on this side of the House were in favour of food and clothes rationing and controls following the war.

Mr. Birch: I did not say in favour. I said that in spite of the fact that the Labour Government had controls they could not predict what would happen.

Mr. Yates: I rather gathered that the right hon. Gentleman was trying to assert that these were controls which we continued unnecessarily.

Mr. Birch: No, I did not say that.

Mr. Yates: I stand corrected on that point.
I wish to intervene in the debate only for the purpose of putting one or two points on Purchase Tax. Many people have expressed amazement and surprise that no reference should have been made in the Chancellor's Budget speech to Purchase Tax. I think that it is very unfortunate and regrettable that when we get a Budget there can be no examination of individual industries or special cases in a debate of this kind, I want to mention two or three points.
In the first place, why cannot there be some sensible examination of the discrimination which exists between the various Purchase Tax rates? I will give one example of an industry in my own constituency. Many small industries are struggling along, having to meet these different rates of taxation. This is an industry in my constituency which manufactures, among other things for which it has very large orders, identification discs for dogs. Just because the firm has put on to the disc the form of a dog, that is considered to be an item of personal adornment, and, therefore, it must carry the rate of Purchase Tax for personal adornment. This is absolutely ridiculous. There ought to be some means whereby we can argue, in some committee or other, that there should not be this kind of discrimination.
As representing a city like Birmingham, which is very much concerned about growth and expansion in industry. I cannot understand why the Budget should not have been used as an example to pinpoint all those industries which

were particularly suffering as a result of the imposition of Purchase Tax. Three years ago, I raised a question about the bicycle industry. We argued about this. At that time I said that Birmingham, Nottingham and other places were suffering as a result of Purchase Tax and that at that time two factories had closed. I now understand from the British Cycle and Motor Cycle Industries Association that six factories have already closed. The industry is struggling very hard to discharge its responsibilities to the export trade, but, nevertheless, it is extremely shocked—in fact, it used the phrase "bitter disappointment "—at the fact that the Chancellor made not the slightest reference to this is his Budget speech.
The Chancellor, having already reduced Purchase Tax on motor cars, could have looked at this case, and could have seen the contribution this trade is making to industrial expansion, and he could have saved at least some factories from closing if he had listened to the representations made by the bicycle industry.
The next point I want to make is about the imposition of tax on confectionery. This was a new tax. My hon. Friend the Member for Sowerby (Mr. Houghton), who made what I thought was a brilliant speech today, mentioned the 15 per cent. tax on confectionery and sweets. That was the first time Purchase Tax had ever been applied to what could be called food products—because those products included chocolate biscuits. The previous Chancellor, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd), last year, referring to ordinary people, said:
If they are to be taxed—if clothing, furniture, carpets, household utensils and all these things are to be taxed—is it not fair and reasonable that sweets, confectionery and ice cream should also bear their contribution?
"—[OFFICIAL REPORT, 16th May, 1962; Vol. 659, c. 1478.]
We protested not only that the tax on clothes did not come down, but at a new tax which had not been put on before.
I want to give an example of how the imposition of this tax on chocolate biscuits has definitely contributed to unemployment. A protest has been made about this in a statement issued by Sir Peter Macdonald, the chairman, to be


presented at the annual meeting of United Biscuits Limited on 31st May. He says:
The year 1962 marked the imposition by the previous Chancellor of the Exchequer of a 15 per cent, purchase tax on chocolate biscuits I mentioned in my statement last year that I personally felt that the Chancellor and his advisers would have been better employed in seeking cuts in Government expenditure and eliminating waste in nationalised industries, thus reducing instead of increasing taxation. I am still of the same opinion, and, as the United Kingdom chocolate biscuit trade as a whole has dropped significantly, the operation cannot be considered to have been a successful one and the tax should be withdrawn forthwith.
As some of my hon. Friends know, before I came to this House I was employed in the chocolate industry, so I have been very interested to see what effect the tax would have. Cadbury Brothers have the largest trade in chocolate biscuits in the United Kingdom. I am informed that the company was disturbed about this tax, because it did not manufacture sweet biscuits, only chocolate biscuits. The company was advised and, indeed, encouraged to take a factory up into a development area for the purpose of manufacturing one thing only, chocolate biscuits; and it did so.
My hon. Friend the Member for Birkenhead (Mr. Collick), I know, is very interested in this matter, because I know a very large number of his constituents will be working at that factory. The firm was employing about 3,000 people in one factory manufacturing chocolate biscuits. The vice-chairman of this firm, Mr. Charles Gillett, wrote a letter to his Member of Parliament, who is the right hon. Gentleman the Minister of Transport, for whom a reply was written by the Financial Secretary to the Treasury.
Replying on 10th May to a letter of 19th April, 1962, the hon. Gentleman said—over a year ago—
The tax is, of course, only at a very moderate rate, and I think it should not have such a serious effect as Mr. Gillett fears on the demand for chocolate biscuits. But we shall, of course, keep the working of the new taxes under review; and this will be one of the aspects which we shall watch carefully in that connection".
Watch carefully in that connection! What has happened? What has happened is that the demand for these biscuits has fallen, and the employment at this factory has fallen by 17 per cent., and that is a very serious matter indeed.
The Government encouraged the firm to go into a development district. I am sorry that the right hon. and learned Member for Wirral, the previous Chancellor, is not here. All the chocolate biscuits made by this firm are manufactured at Moreton, in Cheshire, which is in the Wirral peninsula, and employment there has fallen. What will the Government do in this matter? Can we have a statement? By their action last year and their inaction this year this tax has made serious difficulties for this firm. It has a factory in Birmingham employing, probably, 10,000 people. At the present it has been having to take some work unnecessarily up to that factory to save discharging people.
What are the intentions of the Government in this matter? I hope that we shall be told what the Government intend. It s not sufficient a year ago to say that the matter will be kept under review, and then for nothing to happen, and now for them 4o say that they will still keep the matter under review.
There is a difference between biscuits sold as a food in packets of food in quarter lb. or half lb. packets, and so on, and biscuits, small biscuits, selling for 6d. in confectionery shops. These chocolate biscuits I am talking about figure in 1.he housewife's grocer's bill. They are purchased in food shops. They are not purchased as confectionery in confectionery shops as such. Therefore, when the Treasury talks about confectionery including such things as chocolate biscuits, as though they were not something vastly different from ordinary sweet biscuits, what they say ought to be thoroughly examined.
I can tell the Financial Secretary that we shall raise this matter again in Committee. There is much more I could say about it, but I will not say it all now. I am sure that my hon. Friend the Member for Birkenhead will support me, because he is very interested in this matter because of its relation to employment in his area. I believe that if chocolate is put between two wafers the biscuit is not taxed, because it is sold as a sandwich biscuit. But if the chocolate is put on top of the biscuit it is taxed.
This sort of situation is bound to affect employment, and a number of firms have been so affected. I hope that we shall


get today a statement about Purchase Tax and that this will not be left to the regulator. I hope that the Chancellor will state frankly that where we can point out that unemployment is resulting from his policy he will take immediate action.

5.50 p.m.

Mr. Donald Wade: The right hon. Member for Flint, West (Mr. Birch) referred to the theme of the Budget. I find it difficult to produce a theme or pattern in discussing a Finance Bill. To comment on the Bill in detail is rather like giving a lecture on the composition of a patchwork quilt. I will try to produce some theme or pattern and I can at least assure the House that I shall not refer to all 69 Clauses.
The future of the economy is determined to an increasing extent by decisions outside the Finance Bill. Therefore, the errors which have been committed by the Government in recent years cannot be rectified by one Finance Bill. However, looking back over the last ten years, it is clear that great damage has been done by the policy now commonly referred to as "stop-go". The intention has been to create a temporary pause or restraint but very often long-term damage has been done, especially to capital investment projects.
I think that we have learned that one cannot turn the tap on and off without doing very serious harm to industry sometimes. One of the objections to an annual Budget is that it tends to maintain the illusion that one can deal with the economy my annual decisions. For that reason, I would prefer to have a five-year Budget for capital expenditure. I think that many hon. Members are coming to the view that annual Budgets are out of date. I welcome the White Paper, The Reform of Exchequer Accounts [Cmnd. 2014]. This is a step towards greater clarity. It does not entirely solve the problem, however. Even if there were a radical change in presentation of Budgets, I presume that an annual Finance Bill would be necessary.
In so far as this Bill can reflect or assist the overall policy of the Government, there should be five aims. The first aim should be the encouragement

of expansion of the economy. The second should be regional development of areas of under employment. The third should be greater efficiency and competitiveness in industry. The fourth should be the encouragement of exports, and the fifth should be the reform of our system of taxation. I accept that one cannot perhaps achieve all that, particularly the last aim, in one Finance Bill.
In considering the expansion of the economy, the first question one must ask is whether the provisions of the Bill will expand purchasing power sufficiently. I do not think that they will. For example, there are the personal reliefs. I welcome them but I doubt whether they go far enough. I believe that their effect will only be marginal.
My hon. Friend the Member for Orpington (Mr. Lubbock) had this to say in giving an example during the Budget debate:
A London bus driver with two children aged between 11 and 16 earning nearly £14 a week including overtime has hitherto been paying about £3 a year in Income ax. He is now relieved of that entirely but, correspondingly, he will lose £2 8s. by having to pay an extra 1 id, a week in National Insurance contributions."—[OFFICIAL REPORT, 4th April, 1962; Vol. 675, c. 721.1
That is a net additional purchasing power of 12s. a year, which will not go far towards expanding purchasing power generally and creating expansion of the economy.
Another question we have to ask is whether the benefits are spread as fairly as they might be. There was an article in the Daily Telegraph, which I would not call a wildly radical paper, on 13th April entitled,
Surtax Payers will get the Most Budget Relief.
The article said:
Reliefs to surtax payers will be greater than those to income-tax because of Budget increases in marriage and children's allowances. This is because the difference between the marriage allowance and the single person's allowance, £120, and the children's allowances are set off against Surtax.
As they are already set off against income tax the effect is that a surtax-payer will now have a total marriage allowance of £440. His children allowances, being set off twice, bring his Budget relief to an extra £30 for each child, compared with an extra £15 for each child in the case of a person who pays income tax only.


I think there is point in that argument. I should like to see somewhat bolder reliefs. I would go rather further with these personal reliefs. But I do not think it necessarily follows that reliefs granted to the benefit of Income Tax payers should automatically bring about additional reliefs for Surtax payers. It is perhaps a Committee point, but a principle is involved. It should not automatically follow that Surtax payers should get a correspondingly greater benefit
More important than that perhaps is the problem of regional development. In any policy for expanding purchasing power one must face the danger that if one deals with the country as a whole one may meet with the symptoms and effects of inflation in the south-east of England long before one has cured high unemployment in areas such as the North-East. For that reason, I approve of the concept of more favourable capital allowances for areas of high unemployment. What I question is whether the areas are sufficiently widely defined. I believe that they are too small and that the definition in the Bill is too limited.
I believe that the operation of this proposal will be somewhat chancy. Some firms will find themselves just within, others just without. There may be many anomalies. I doubt whether this will be sufficient to encourage the kind of regional development necessary. I look forward the hearing the Chancellor about overspill areas, but even if this proposal applies to them, I am not sure that the definition of such areas will be wide enough. We must consider this in terms of the need for regional development. This perhaps could be dealt with by amending Clause 38(5) or it may be necessary to amend the Local Employment Act. I hope, however, that we can deal with it by amending this Bill so that much wider scope can be given to these capital allowances.
I said that one of the aims should be a more efficient and competitive industry. An obvious step would be the abolition of the fuel tax. One of the disappointments in the Budget was the absence of any provision for abolishing this tax. I know the argument about coal, but surely the proper course is, if necessary, for a subsidy to be given to the coal industry rather than that the whole of

industry should be penalised by the continuation of this tax.
As I have said, in this patchwork quilt of a Finance Bill, it is inevitable that one must turn to details that are almost Committee points, so I want to deal with Clause 35, which introduces a simpler and more realistic rate of depreciation for machinery. The great drawback is that it applies to machinery bought after 5th November, 1962. This date of original purchase is the governing factor no matter how often an item may have changed hands during its life.
We must recognise that machinery and plant change hands and that it does not follow that a mill or factory is not up to date and efficient merely because the machinery is second-hand. I think that this proposal will lead to the problem of providing evidence for tax purposes of the date of purchase. A great deal of time and unproductive labour may be involved in satisfying some bureaucratic requirements in proving the date of purchase. This is not only my view. I have had a letter from a chartered accountant on this subject which says:
… the purpose of the allowances in question (the Annual allowances for depreciation) is to arrive at a fair calculation of profit for taxing. Hitherto, the inducements to invest or re-equip have been in the form of special allowances not annual allowances, and this seems fair enough, for a special allowance is tantamount to a change in the rate of taxation, which is a very proper method of control. This clause, favouring plant bought after a certain date, uses the annual allowances as a weapon of economic control. It seems a prime example of the tax-complexity of which we complain, for the Revenue to say that a loom bought after 5th November 1962 wears out one-third more quickly than a loom bought a little earlier. It also seems unfair on those who have already re-equipped, and on those who use their machines carefully and economically, and make them last in a thoroughly efficient (and not old-fashioned) way.
It may be that we can turn to that matter in Committee. The letter seems a fair criticism.
I welcome the special provisions in Clause 36 for scientific research. But, as with the areas to which the capital allowances apply, the definition is too limited. 'Will these allowances for scientific research apply to pilot schemes and experiments necessary for the application of the results of scientific research? Sometimes a great deal of money is expended on pilot schemes and it is very


necessary to encourage them if business is to be more efficient. As I read the Bill, the special provision with regard to scientific research will not apply to pilot schemes. In my view, one might go further and apply this kind of relief to overseas market research also, and this brings me to the subject of exports.
There is very little in the Bill directly to encourage exports. I regret that no decision has yet been reached on the subject of an added value tax. I look forward with great interest to the outcome of the deliberations of the Gordon Richardson Committee, but, if this subject was to be studied, the study should have started at least a year ago. We have known what was going on on the Continent all this time and we ought to have been able to make up our minds about an added value tax.
I think that it comes within the scope of the Second Reading debate to refer to the Export Credits Guarantee Department. I do not belittle the work of the Department, but one does keep hearing complaints about delay and about its rather conservative attitude. If one accepts the need for Government sponsored credit in helping exports, it is important that this country should keep up with other countries. I do not say that we should indulge in all that other countries do, but we should continually watch what is done elsewhere in helping to provide credit. I have been asked about the growing practice of leasing capital equipment. I understand that no assistance would be available from the Export Credits Guarantee Department where capital equipment was leased and not sold. This seems to be a growing practice, and we should give serious thought to it. On the whole, the Bill has not been very helpful, at least in its direct provisions, in encouraging exports.
What about tax reform? Here I am disappointed. There is no major reform in the Bill. The question of whether we should merge Income Tax and Surtax is still being considered and we do not know whether this is to be shelved. The question of a corporation tax and the merging of Profits Tax and company Income Tax is still being considered, and we do not know what is to happen. But there are other reforms which could be carried out, and we need not wait for

these subjects to be further considered. I should like to have seen the Stamp Duty on transfers abolished. It would certainly help to make the City of London the capital market of the world.
I come now to another point of detail. I apologise for turning from generalisations to details, but it is inevitable. In Clause 56, there is a reference to bearer instruments by usage, and I think that these will now be subject to duty. It would be helpful to know whether a letter of renunciation, which previously was not liable, will now become liable to duty. If the Chancellor is unable to deal with this when winding up, perhaps he will deal with it in Committee, because I have been asked the question by several people. If a letter of renunciation will now become liable to duty, it would seem that the advantages of reducing the Stamp Duty on transfers will be somewhat offset by the inconvenience of this new imposition.
As regards Estate Duty, I welcome the exemption of small estates brought about by the raising of the level in Clause 49, but, in my view, we could have gone further. I advocate a major reform here, something very much more radical. I would abolish Estate Duty altogether. Before the Chancellor of the Exchequer looks too shocked at the possible loss of revenue, I add that I should introduce a legacy duty in its place, with, of course, a limit below which no duty would be payable. The legacy duty would vary according to the size of the legacy.
I suggest that there should be no Estate Duty at all, but that there should be a legacy duty, the duty upon very large legacies being correspondingly heavier than on the smaller ones. By this method, people would be encouraged to divide up their estates and, in time, this would have a quite important effect on the ownership of wealth throughout the country. I think that it might have a quite radical effect in time because of the encouragement it would give to the wider distribution of estates left by people on death.
I shall not discuss the subject of a wealth tax at length. My objection to a wealth tax is that it would adversely affect people with small businesses and new enterprises. To have to find tax, even at a comparatively low rate, out of capital could be a serious matter. The


figure of £20,000 has been suggested as the starting point, but a small business, taking into account the building, the plant and machinery and stock might very soon find itself with a total of £20,000 capital. If a payment out of capital had to be made every year, this might have a quite harmful effect particularly on new enterprises in which there might be no profit at all for, say, the first five years. However, we are not discussing a wealth tax today.
I welcome the abolition of the Schedule A tax. I do not share the somewhat conservative views of the hon. Member for Sowerby (Mr. Houghton) about taxes which have been in operation for the past 100 years. I have long advocated the abolition of Schedule A tax. I think that I was one of the first Members to propose its total abolition. I find it a little ironical, when I remember that, year after year, when I put down Amendments on the subject, I wondered whether it could be done by one paragraph or whether two would he needed, and I now find that it requires 19 Clauses and 11 pages of the Finance Bill. We live and learn.
I put again the practical question which I raised in an intervention but the point of which the Financial Secretary did not, I think, fully appreciate. I am advised that any expenditure which has been incurred on repairs since 31st March, 1962, will not be available for the purpose of maintenance claims in respect of Schedule A tax already paid over the past five years. 1 shall be corrected if I am wrong, but I understand that this is so. Even though one has expended money on repairs before one knew about the change which was to take place, it is too late if the expenditure was after 31st March, 1962.

Mr. H. Lever: It is a curious line of argument to suggest that the Revenue should allow the refund of tax in respect of expenditure which only came into being after the tax itself had been abolished. I do not understand this. Why should the Revenue pay back tax collected last year for expenditure undertaken this year?

Mr. Wade: The whole system under which maintenance claims have been made in the past is that one is able to take an average over a period of years. I will give the hon. Gentleman an

example. If one incurred expenditure on 30th March, 1962, one would be allowed to make a maintenance claim in respect of tax already paid. If it was after 31st March, I understand that one cannot do this. All I ask is that the point should be clarified,
Now the building societies, this hardy annual. I cannot speak on the Second Reading of the Bill without mentioning the building societies. We have had many debates on the subject, and one point on which there is general agreement has clearly emerged, namely, that one cannot logically distinguish between Income Tax on surpluses and Profits Tax on surpluses. I am not talking now about Income Tax in respect of interest paid to depositors which is accounted for by the building societies to the Treasury. I see no logical case for exempting that from tax. I am speaking now about the surplus, which is not a profit. There is no reason why this surplus should be subject either to Income Tax or Profits Tax. Hon. Members on both side of the House have in past years proposed that this particular imposition should be abolished. It would be a practical and logical step. It would not create any harmful precedent, and it would be a perfectly reasonable step to take.
I am somewhat disappointed by what the Chancellor has done in regard to tax reforms generally. There are 103 pages in this Finance Bill, but, as regards major tax reform, it would be fair to say that never have so many words been written to achieve so little. I hope that, by the time we reach the Third Reading, I shall be able to alter my opinion.

6.18 p.m.

Mr. Norman Miscampbell: Perhaps I may be excused if I do not follow points which have been made by the hon. Member for Huddersfield, West (Mr. Wade). The hon. Gentleman has made a very wide-ranging ant interesting speech, and the very width and number of his points will lend weight to my excuse. Perhaps 1 may add that, since we have, apparently, had put to us the Liberal alternative Budget, it Is not for a comparative newcomer such as myself to reply to it.
I wish 10 raise what I recognise to be a detailed constituency point. The most interesting—certainly, the most far-reaching—proposals which my right hon.


Friend made in his Budget were those designed to help the development districts, bearing in mind the considerable relaxations there were in the months prior to the Budget. But, in saying "Thank you" on behalf of Merseyside and other areas in the north-west of England for these relaxations and that help, one must face the considerable disadvantages which come to places such as the Fylde coast.
I know that these disadvantages are recognised by the Board of Trade and the Government, and I know, also, that the Chancellor himself made a special plea in his Budget speech that we should not all jump up from the back benches and ask for our areas to be looked after. I appreciate that, to some extent, but only to some extent, I am about to do what he asked us not to do.
The point that my right hon. Friend made in his Budget was good and particularly relevant: it is impossible to extend these areas regardless of all other considerations. Obviously, if they are extended, dilution will occur and, in the end, we shall not achieve our aim. This is particularly true for the marginal, or grey, areas which surround or are near to the development districts themselves. People can travel from such areas into the development districts to where, one hopes, new industries will go because of the incentives of the Budget.
In the built-up end of the Fylde coast and places such as Blackpool—and Fleetwood, which really goes with it—one has a situation where it is not possible for people to go to the nearest development district and yet where nearly all the qualifications to become a development district are present. In Blackpool, in the winter, the rate of unemployment went up to 8 per cent. It is now coming down—it always does as one approaches the summer—and in March it was down to 7 per cent. I am glad to say that it is now down to 6 per cent. The same goes for Fleetwood.
But this is not a small, not a pinprick, area for which I am asking for consideration. It now includes a population bordering on 250,000 and has a high rate of unemployment for eight months of the year. While the rate comes down to a comparatively low

figure in the summer, the summer period is shorter than is often recognised. At the most it is four months and during that time skilled tradesmen often take jobs, which they do not necessarily want to take, on the so-called Golden Mile and in the ancillary holiday trades which go to make up Blackpool and the surrounding holiday resorts. Inevitably, unemployment goes down to a comparatively small figure which, allied to the higher winter figure, gives an average which does not paint a true picture of the situation.
The unemployment problem in Blackpool is not that of Merseyside. It is much more complex. We have little or no problem about women employees. We have a residual difficulty of satisfying the employment requirements of about 2,000 male employees and, come good season or bad, that difficulty stays with us. It was recognised in previous legislation, when Blackpool was designated a development area, or its equivalent. However, two or three years ago we came off that schedule and we have never gone back. We have a special problem, a problem which, with the areas of Fleetwood and Lytham St. Annes, affects 250,000 people and which continues and which does not seem to have any solution.
No new industry has come to the area in the last two or three years, which is not surprising, largely because industry has not been very much on the move in this country. However, in the town there are industrial premises which would provide the incoming industrialist with a factory. The problem is that we have the difficulty of satisfying the employment needs of 2,000 men—not women and, perhaps surprisingly, not necessarily the younger people. The hard core of unemployment is made up of men. The problem never seems to disappear and yet we have a factory always available. The question is whether the present proposals will cope with Blackpool's difficulties. I fear that they do not satisfy Blackpool's needs as well as might have been hoped. As has been shown on many occasions, it is certainly true that once an area is designated a development district, help comes to it rapidly. There is no doubt that Blackpool would like to be designated—the Board of Trade knows that we have asked for it several times.
I can understand the Government's difficulties when they are always being asked to schedule areas as development districts. I make it clear that we would like to be a development district, but that, if we cannot be, there are other steps that should be taken, though perhaps not quite so efficacious. The hon. Member for Huddersfield, West touched on them when he asked why development districts could not be broadened. One answer to that is that to broaden them on the present basis would dilute the chances of industry going to where it was most necessary One has to be very careful about a simple extension of the present areas.
Nevertheless, 1 am sure that it would be helpful if it were generally known—and I wonder whether this could not he made known beforehand—that the Board of Trade would look favourably upon the granting of I.D.Cs. for the Blackpool area, or similar areas which have similar special problems, if the proposed industries would cope with those special problems. It would not help us a great deal if we were to have a textile factory, for instance, whose demands would be largely for female labour. I would like the town clerk to be able to say, "My information is that an I.D.C. can be easily granted if these requirements are satisfied".
I know that giving discriminatory help in certain cases is always much more complicated than back benchers make out. It has been argued quite fiercely that Northern Ireland, for instance, could not be given special tax reliefs, or special tax advantages, but that is just what has happened by making the whole of Northern Ireland a development district. Would it not be possible to give special help to certain areas outside the development districts, restricting the help to particular firms or types of firms which wanted to move to those areas?
It might be said that that would be unfair and I concede that in many ways it would be, but, after all, we already discriminate. We discriminate between areas which are development districts and those which are not, and within development districts we discriminate again in the giving of grants under the Local Employment Act, for instance, by saying that grants will not be given for what has been described as the goldfish bowl

in the manager's office. We already have power to decide where to apply the money—inside or outside an area, and, within an area, to what type of factory or what type of commerce.
The Chancellor's present proposals largely exclude commercial undertakings—shops, and so on—but it might be possible for areas outside the development districts to be designated areas which the Board of Trade would be prepared to consider for special treatment in respect of certain types of industry willing to move to them, the firms in question than coming within the ambit of the allowances and grants.
I am thinking particularly of my own constituency. I would not have thought it impossible to draw up a list of the requirements which a firm would have to have if it were to move into Blackpool and receive these benefits, and a list of the type of firms which would help the area most. I have explained our difficulties and pointed out that we do not want firms employing only girls, but that we want them to employ men as well.
If this were done we could have a list before us and be able to say that we are prepared to help new firms in certain areas. Not a penny should be given to firms already established there. Many people might not agree with this view, but I believe that if something like this is sought our requirements should be limited. The system could be arranged so that new firms prepared to enter certain areas and which satisfied certain requirements would be helped by the Board of Trade.
I appreciate that there would be administrative difficulties. There would certainly be objections from civil servants, although they can be viewed with the scepticism one should adopt to such objections. There would be a dilution of the help being given to areas such as the North-East, Lancashire, Merseyside, and so on, but despite this, I hope that my right hon. Friend will consider my suggestion. I realise that this dilution might cause difficulties for certain areas, and the hon. Members who represent them, but I do not believe that those difficulties are insurmountable. I do not wish to ask for something which will hurt other areas, but I do not believe that the assistance for which I am asking would involve any great anxiety.
As I have said, I do not desire by this proposal to help those pinpoint areas about which we heard so much in the Budget debate; areas which are surrounded by or near to development districts. I appreciate that there are arguments for extending the whole development district scheme, while there are others for keeping it as it is, in its present tight state.
It must be realised, after all, that if a person lives in an area which is surrounded by development districts he is able to go by train or catch a bus to work nearby. There are other areas, such as the one I represent, where that is not possible, and where the people rely on the place itself for their employment. Would it not be possible for my right hon. Friend to give the sort of areas I have in mind the limited help I am requesting? I appreciate that we must start by asking for only this limited help, because if we ask for more we shall not get it and, in any case, asking for too much might do the country more harm than good.

6.33 p.m.

Mr. Ellis Smith: My hon. Friends and I have listened with great care and sympathy to the case put so ably by the hon. Member for Blackpool, North (Mr. Miscampbell). He outlined in a descriptive way the main difficulties of the Blackpool, Fylde coast, Fleetwood and Lytham St. Anne's areas and we thought that for three-quarters of his speech no one could have stated the case more clearly. We were rather disappointed, however, when he began to ride two horses, as it were.
On an issue of this kind one is either for or against something. If one is for it—and I am speaking as I feel about these things and not necessarily in the way that the hon. Member for Blackpool, North feels; although I hope that he will adopt my attitude in future—one should say so openly. When one has a proposal designed to improve the conditions of one's constituency one should put that proposal forward as strongly as possible and endeavour to secure the maximum good for one's area.
I hope that the hon. Member will not feel discouraged by what I have said, but that he will apply the attitude of

mind I have just described in future, for it is most important at this stage of the development of our democracy that people should retain confidence in the capacity and ability of the people who speak for their good in Parliament.
I have no hesitation in saying that there is less democratic influence in the hands of the Government and their various Departments now compared with thirty years ago. If anyone doubts me he need only listen to what is said and seen on television. I am referring, of course, to some of the dilettantes who appear on television, some of whom will be on the country's screens in about two hours' time. Anyone who doubts what I have said can measure the influence they possess compared with the influence possessed by those of us who have devoted our lives to serving the class from which we come—and I mean, of course, people in general.
Hon. Members who have devoted their lives to them need not defend their record over the years. The influence about which I am talking can be measured quite easily by anyone who watches either television channel and hears what is said about the problems facing the country.
I intend to make some observations of a critical nature, but, at the same time, I wish to be constructive. I hope that the Chancellor and the Financial Secretary will consider them before the Bill goes into Committee. I listened to the whole of the speech of the Financial Secretary and I must admit that he spoke in an able way. I have heard some hon. Members say that his speech was rather long. I do not hold that view, for it should be recognised that a speech dealing with a Bill of this kind, containing so many Clauses and Schedules, deserves a thorough airing.
The Financial Secretary said that Clause 2 would, if I may paraphrase his words, bring about a comprehensive inquiry into gaming. He described it as a fact-finding inquiry and intimated that legislation would probably follow in the future. I hope that when replying to the debate the Chancellor will tell us whether he intends to invite organisations to give evidence and make suggestions to the inquiry. For instance, millions of pounds are taken out of Association football every year, almost all of it being spent or


used by millionaires to finance the rest of sport.
I believe that this responsibility should be on the shoulders of others. While no one wants to stop all the good work that is being done as a result of the money taken out of Association football, it is all a question of degree. I hope to deal with this matter more fully in my speech but, if time prevents me from doing so, I shall raise the matter in Committee.
I regret that the hon. Member for Huddersfield, West (Mr. Wade) is not in his place, because I wanted to comment on some of his remarks about Clause 14. I can assure him that some hon. Members have tried for several years, by both supporting and voting in the House, to abolish the charge referred to in that Clause. It has taken the Government a long time to get round to this. I emphasise as strongly as I possibly can that Clauses 38 and 39 are very unfair to such places as Stoke-on-Trent, Manchester, Salford and the large industrial areas. I will produce evidence to prove that later in my speech.
I understand that substantial sums are outstanding and at stake in regard to Clause 27. Apparently they are now being considered by the Inland Revenue in consultation with those who are being asked to pay those outstanding sums. I have a certain amount of evidence with me on this subject. I cannot give it all, because I want to move on and to elaborate on some of the points that I have already made. There is one club, for example, in Sutton-in-Ashfield, which has been in touch with me. It is an athletic club which has received a demand for Schedule A payments from 1958 until 1963. This means that a new interpretation must have been put on this matter because the demand seems to be anomalous. This is stated by the director of the club, who considers that it is being penalised by the Inland Revenue. The club suggests that a Question should be put to the Chancellor about this, but I am dealing with it in my speech.
May I make a few preliminary observations leading to more fundamental remarks which I shall make later on Clause 38, which deals with
Annual allowances for new machinery and plant in development districts".
My hon. Friends and I have special reasons for asking this question: where

the main plant or the main industrial establishment is not eligible for the concessions granted in the Clause, and where the extension to the main plant have been built in a development district, will there now be a right to the concessions? What will be the position of plant wed for the same production of the final product?
When the Chancellor of the Exchequer was introducing the Local Employment Bill we listened to him with great sympathy. Our interpretation was that this provision was for new industry but not for extensions.

The Chancellor of the Exchequer (Mr. Reginald Maudling): The benefits under the Local Employment Bill will apply not only t) new industry, but also to extensions of existing firms.

Mr. Ellis Smith: In his budget speech the Chancellor set out the main ideas behind the proposal. He said that the Government had a part
in achieving the rate of growth broadly described as the 4 per cent. target".
He said that he wanted
sound expansion without inflation
which would
not weaker. sterling but strengthen it".
He stressed
that this is a task for the whole nation 
and that
the Government must have primary responsibility;…we must take the initiative. But Government policy alone cannot achieve the objective.…This co-operation we seek not by appeals, but by action, action that will pave the way for a joint effort."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 674, c. 455.]
Does he consider that the Finance Bill is satisfactory in the light of those desirable aims? Which steps have been taken of a concrete character to enable the nation to respond to the plea in the Budget speech, in view of the fact that one month has now elapsed? The Chancellor made many other statements supporting the view which he has expressed. My point is that although only a month has elapsed, I had expected that before such a statement was made other steps would be prepared to see that it was implemented.
I come to my main theme tonight. It may not reecive much support in the House, but I assure the Chancellor that it will receive strong support in many


parts of the north of England. In the main industrial areas of England, where we have poured out wealth for generations, we have suffered from the worst air pollution in the world. We have suffered from the worst environment, created by coal pits and steel works, derelict land, mining subsidence and river pollution. Now, according to Clause 38, we are to suffer because of the density of population in the areas in which we live. That is the logic of the concessions stated by the Chancellor and set out in Clause 38. At the present rate of clearance of our derelict areas, land and pit mounds, automation will be in operation in many parts of the world before we have cleared away the black legacy of the industrial revolution.
I have before me HANSARD of 1st May, 1963, and I refer to cols. 117 and 118. In Guisborough there are 7·7 per cent. unemployed and the total is 872. In West Hartlepool and Hartlepool, the unemployment percentage is 10·2 and the total unemployed 3,883. In Seaham, the unemployment figure is 629. Within 10 miles of the city of Stoke-on-Trent there are 5,000 unemployed; in Manchester, 12,500 unemployed; in Salford, near where I live, 2,900 unemployed; and in Wigan, 2,000 unemployed.
I ask the Chancellor and the House whether this is a scientific or fair way of measuring the needs of an area. Is it fair Ito provide for some areas such special attention as a Cabinet Minister appointed for one region, while those of us who represent and have spent all our lives in other regions, which have suffered as I have explained and which are still pouring out millions of pounds of wealth to enable the country to maintain its export trade, are apparently again to suffer by unfair, discouraging, discrimination against our areas?
Many of the towns which are receiving concessions of all kinds have not half the unemployment which we have in Stoke-on-Trent alone, where there are, 4,460 unemployed. In Oldham, the figure is 2,486; in Manchester, 12,539: and in Salford 2,910. In many towns the figure is 200 or 300 unemployed, and yet they are receiving concessions and special attention. The Chancellor may not accept my line of reasoning, and

if he does not I am prepared to understand it, but I ask him to consider some official figures which I am about to quote.
So that I could get the problem in its correct perspective I put a Question to the Minister of Labour on 26th April. He replied that the number of unemployed registered on 8th April, 1963, in the whole of Scotland was 114,199. In the whole of Wales it was 37,936. In the north-east of England, where they are having special attention and a Cabinet Minister flying backwards and forwards, the figure is 62,809. Within a 50-mile radius of where the people live whom we represent, there are 139,713 unemployed, and within 10 miles of Stoke-on-Trent 5,034 unemployed, according to these official figures.
I therefore repeat: is this a fair way of measuring the level of unemployment? Is this a scientific way of deciding on the concessions to be given in the Finance Bill? Is this a fair way to treat people who are still making a substantial contribution to our export trade and are, therefore, keeping us all going? Is this a fair way to treat people who have suffered from air pollution and other industrial blight for so long? From north-east Staffordshire and the City of Stoke-on-Trent, in particular, millions of pounds of wealth have been poured out for centuries. The legacy which we have inherited from the dark days is a large amount of derelict land which has disfigured the city and its surroundings for over 100 years. During the whole of time it has been allowed to lie there and no action has been taken.
Thanks to my hon. Friend the Member for Stoke-on-Trent, North (Mrs. Slater) and her colleagues—for we have a Labour majority on the city council—action of a determined character is at least being taken, and more action is proposed. We have come up against the difficulty of the unfair Government policy in treating us like this.
I do not believe in speaking unless have obtained the facts to support what I wish to say. To establish the facts I asked the Minister of Housing and Local Government, on 15th March, what financial incentive he is offering to the City of Stoke-on-Trent
sites; what rate of grant is made for each site cleared; and upon what basis …
in order to expedite the clearance of derelict


He replied:
There is no specific grant for site clearance in these areas." — [OFFICIAL, REPORT, 15th March, 1963; Vol. 673, c. 211.]
It is true that the answer is fairly lengthy and I do not want to quote it all, but that sums it up.
I wrote to the town clerk, and I propose to refer to a few extracts from his reply, from which it will be seen that I am putting not only my own point of view but that of the city council, the people supporting them and some of the most conscientious municipal officials in the country. He has sent me three schedules. One deals with 111 acres of derelict land for which the local authority has prepared redevelopment schemes, for which it is not receiving a penny. Since 1946, more than 900 acres of derelict land have been reclaimed. Out of the tenth of the total area of the city which lies derelict, 2,300 acres have been reclaimed. He points out that they have set a large amount of this land aside-all at the cost of the city council, all out of the rates, with no national support. This national support is given to certain areas, but not to those which have poured out millions of pounds of wealth for generations.
To assist with local unemployment, the city council has provided industrial estates. Not one penny of national help has been received. Because of the way in which the Acts are administered, we can get hardly any new industrial capacity into the area. In addition, we are even losing some of the extensions which I think should have remained in the city. The town clerk sums up his letter by saying:
In these matters it is the view of my council that some major financial assistance should he available from Government sources.
Within a radius of 10 miles of the city there are 5,000 unemployed. We have had stolen from us by the Board of Trade three extensions which would have provided employment for at least 3,000 people and which ought to have been built in the city. It is about thirty years since the city council—long before any Government thought of it—went out of its way to encourage a foreign industrial establishment to come to this country. To get it in the city, the council provided it with facilities of all kinds. In those days the industrial relations between management and the people were as bad as they could

possibly be. The men and women were right. It was management which was wrong.
As the result of the evolution of such ideas, and with this firm accepting British standards, the firm's industrial relations an as good as those in any part of the country. In spite of that great pioneering work by the city council and others, the extensions to which I have referred have been taken to other parts—

Mrs. Harriet Slater: Twice.

Mr. Ellis Smith: —on two occasions, as my hon. Friend reminds me.
I take second place to no one in my sympathy with those who are suffering through no fault of their own or in my sympathy for the areas to whom these concessions have been made, but I still maintain that this is not a fair or scientific way of measuring the need, and it is not in the national interest. The Stoke-on-Trent Council has spent £28,627 on one industrial development, £11,720 on another, and £12,000 on a third, but no Government support has been forthcoming.
Here an' a few facts showing the seriousness of our situation. There are 12½ million cubic yards in the mounds or tips in the area, half of it being within the City of Stoke-on-Trent itself. Due to financial restrictions, and because we get no financial support from the national Government, it will, at the present rate, take twenty-five years to clear North Staffordshire of its derelict land and pit heaps. We can pay taxes so that other areas can be clean, but we must not have a penny to help us keep our own area clean. The city council recently stated that it was of the opinion that contributions should be made nationally to assist with such reclamation work carried out by it.
I ask the Chancellor to give consideration to my observations between now and the Committee stage. If he has any doubt about any point or fact that I have established, I undertake to get confirmation from the city, or from the industrial undertakings within the area.

6.58 p.m.

Mr. Stanley R. McMaster: I hope that the hon. Member for


Stoke-on-Trent, South (Mr. Ellis Smith) will forgive me if I start with the Finance Bill itself. I am not quite happy about Clause 29, about which I have had a number of complaints. This Clause relates to Schedule A changes, and subsection (1) states that it is intended to disallow the deductions of the net annual value of properties owned and occupied for the purposes of trade in computing profits based on Case I or Case II for 1963–64. I am not quite satisfied with the way in which my hon. Friend the Financial Secretary dealt with this subject.
As the Bill is drafted, there might possibly be an overlap. In that case, a heavy additional charge would be placed on the profits of a majority of taxpayers, because they would have paid tax under Schedule A from the date they acquired the property until 5th April, 1963, but the period for which they would be permitted a Schedule A deduction in the Schedule D computation might be less by as much as two years. The relevant fact is when they complete their year. I do not expect my right hon. Friend to deal with this matter tonight, but I should like him to look at it, as there is some anxiety in the business community about the effects of the Clause.
The provisions relating to capital allowances start with Clause 33. First, regret that the recommendations of the Royal Commission with respect to non-industrial buildings have not been adopted. I refer particularly to buildings used by the distributive trades. There is an anomaly here which the Chancellor might like to look at either in respect of this Bill or of next year's Measure.
The chambers of commerce with which I am associated are praising the way in which the Bill has been drafted. A number of accountants who take particular interest in tax matters have been pleased that figures have been substituted for words, particularly in page 9 which deals with personal reliefs. For the first time, figures have been used instead of words. But one point that causes some annoyance to professional people is that fractions are used in various parts of what is admittedly a long and complex Bill. In some cases percentages are used, and in others such

fractions as three-fifths or one-quarter. It might be better to stick to percentages.
My right hon. Friend the Member for Flint, West (Mr. Birch) drew particular attention to the theme of the Budget debate, and I should like to leave other small criticisms of the Bill to the Committee stage and, perhaps, put down Amendments to express them, but as hon. Members have referred to the more general effects of this Measure I should like to tell the House how it affects the people in Northern Ireland and some of my own constituents.
I welcome, of course, the provisions for free depreciation. As my right hon. Friend the Chancellor knows, I have long advocated the principle that the tax system should be used to deal with this great scourge—one could not call it anything less—in the economy of the United Kingdom as a whole of heavy pools of unemployment in some areas and over-full employment in others. At the same time, I think that my right hon. Friend could have chosen a different way of dealing with the problem. Though the system incorporated in the Bill of free depreciation on capital allowances is perhaps the easiest one for the administrators—and that is important—I wonder what effect it will have on industry.
If the main reason behind the change is to encourage industry to go to Northern Ireland, the North-East and Scotland, one must make sure that our measures are effective. What is the point in being able to write off one's entire capital in the first two, three or four years, as opposed to a longer period, if one has no profits in those first few years? And what industry makes sufficient profits then? Further, assuming that they are successful—and it is a big assumption—is it not rather a long shot, and is it sufficient to affect the minds of the industrialist?
I have advocated in the past the adoption of the expedient of a tax holiday. That was done before the war in this country, it is used in France and in Northern and Southern Ireland, and it has attracted new industry. It is a cleaner and better way of accomplishing the same end—

Mr. H. Lever: My recollection of the pre-war years is imperfect, I know, but I do not clearly recollect anything then


that could resemble a tax holiday. Can the hon. Gentleman enlighten me?

Mr. McMaster: Tax concessions were given before the war to certain industries. Tax holidays can be used either to assist particular industries or to help certain areas by way of tax exemption. It is because they were used in the former sense before the war in this country that I was about to argue that they should be used now to assist different areas. However, I should not like to go into this in a great deal of detail now, but I should be glad to discuss it with the hon. Member later.
Assuming that an allowance on capital and machinery proves attractive, those investing the most money are usually established industries, and we have found in Northern Ireland that very often such industries do not employ a great amount of labour. I therefore suggest that the tax holiday is the better way, and it would be shared equally by all industry. We in Northern Ireland, with our very high rate of unemployment, are particularly anxious to attract labour-intensive rather than capital-intensive industries.
Another point is that because labour and other costs are very high in the south-east of England and not so high in other areas, marginal industries in the South-East might well wish to transfer to the development districts or to Northern Ireland, but under the system of free depreciation they will receive the allowances only if they buy more machinery, and if one wishes to attract firms to a development district in order to give employment there, it should not matter to the Inland Revenue whether they buy new machinery or use existing machinery. I feel that this proposal does not meet the point satisfactorily.
To sum up, I should like further thought to be given to these provisions now that it has been accepted that we should use the tax system to encourage industry to go to areas of high unemployment. I should like to see us seek in the measures we adopt as great
a flexibility as possible. We should also encourage existing industries to go to these areas and perhaps to existing factories. I can think of idle factories in my own constituency due to the run-down in the linen industry. I do not feel that it is

making the best use of the resources of the country t imply to limit in this narrow way free depreciation on new capital equipment and to subsidise factory building.
If a similar sum could be spent to encourage industry to go to these areas and to take factories which are now unoccupied, and if the money were used to attract that industry by reducing its tax liability, we should have a better use made over the whole country of our natural resources. This applies not only to Northern Ireland but to many areas of the United Kingdom. Although it is nice to spend taxpayers' money to put up fine modern factories, I should like to see the money used more effectively as long as the-e are unoccupied premises. A little more thought might be given to how best to use the money available to secure the exports we need and not to waste ass stance in any way.

7.12 p.m.

Mr. Harold Lever: The hon. Member for Belfast, East (Mr. McMaster) always speaks with moderation and in an informative way which commands the attention of the House. I was already priding myself upon my usual measure of agreement with what the hon. Member said when he was criticising the Government's proposals for helping the development districts on the ground, which I thought logical, that there is little advantage in giving tax relief if there are no profits on which the relief is to be given—

Mr. Barber: Perhaps I can help the hon Member and my hon. Friend the Member for Belfast, East (Mr. McMaster). If a company in a prosperous part of the south of England is considering expanding part of its trade in a development district, and goes there, it can obtain allowances for plant and machinery which amount to 130 per cent. of the cost and set that off against the profits considered as a whole. That is really the point.

Mr. Lever: I thank the Financial Secretary, but I still propose to deal with his hon. Friend's logical argument before dealing with his illogical intervention.
Having advanced the logical argument to which I referred, the hon. Member for Belfast, East thereupon thought that it would be better if there were greater tax


relief than is contained in the Finance Bill, which did not seem to me to be logical. He referred to what most of us would regard as the exhilarating experience of a tax holiday. He even suggested that such an experience had been enjoyed by citizens of this country before the war, although when pressed to remind me when it occurred, so that I might savour it once again in restrospection, the hon. Member was unable to assist me.
The Financial Secretary pointed out that if a firm was making good profits in a non-development district the Bill would be useful because if the firm were to lose money in a development district it would be able to obtain tax relief for its computed losses in the development district against the money in the prosperous area. This, I thought, was hardly a matter which would induce industrialists to move into development districts. In any case, there are formidable objections to this way of dealing with development districts.
I agree very much with my hon. Friend the Member for Stoke-on-Trent, South (Mr. Ellis Smith) in his argument that this selection of narrow areas of the country for a special tax régime of this kind is singularly unfair to other areas in very great difficulties which have to bear the burden of tax relief granted in development districts to those who can claim them there. We have an extraordinary system whereby the Treasury has abdicated all fiscal principle and has created islands of special fiscal privilege in this country where some industrialists pay one rate whilst others in other areas pay a different rate. Those in the development districts pay less than the standard rate and those in the non-development districts have to foot the bill for their competitors in the development districts. What happens is that the hard-pressed taxpayer or the industrialist who is having difficulties in Stoke-on-Trent has to finance fiscal concessions to industrialists on the North-East Coast, a principle which my hon. Friend finds very unfair and which he so very well put to the House.

Mr. McMaster: I thought that the general feeling of hon. Members opposite was that if business was not doing too well in Stoke-on-Trent they would welcome greater prosperity throughout the United Kingdom to create markets for

their goods. Is not this a point which is worth considering?

Mr. Lever: We have a vested interest in the prosperity of all parts of this island, and, indeed, in world prosperity, but if somebody suggested that I should pay more Income Tax to increase prosperity in the Fiji Islands, on the ground that the Fijians might then become better customers of ours, I dare say that this novelty in the fiscal system would not be welcomed. I do not compare the hon. Member's constituents with the Fiji Islanders for they have a geographical and racial affinity with people in these islands.

Mr. McMaster: I feel very moved on this matter and, therefore, I am grateful to the hon. Member for giving way again. Does he not see that it is better than paying dole—which is also a charge on the nation—to unemployed people in Northern Ireland and elsewhere that they should be employed and thus pay tax, since the tax they would pay might very well cover the greater part of this additional inducement?

Mr. Lever: The hon. Member has not quite taken my point, or, rather, he has not allowed me to complete it.
I am not without sympathy with people who are out of work, whether in Northern Ireland, Stoke-on-Trent, or any other part of the kingdom. What I object to is the extraordinary novelty in our taxation system whereby we attempt to remedy unemployment by establishing two different fiscal systems. There may be a case for this novelty, but it does not necessarily depend upon sympathy with the unemployed or the economic depression in Northern Ireland. There are several choices. The startling alternative offered by the hon. Member is not the only choice available to us. We could finance industry in Northern Ireland. We could subsidise it. We could provide cheap factories. There are innumerable expedients open to us to encourage industry to go to Northern Ireland.

Mr. McMaster: At the same cost to the taxpayer.

Mr. Lever: But we would not have established a fiscal system differing in one part of the United Kingdom from another. We should be taking an individual case of need and subsidising


it, and once we had subsidised the need in Northern Ireland we should have conceded the case for subsidising the need in another part of the United Kingdom. If we evolved a system of that kind there would be no difficulty in applying it to Stoke-on-Trent. if we want to provide a cheap factory in Stoke-on-Trent, that it quite easy, but we cannot apply to a narrow area like Stoke-on-Trent a completely different fiscal system, as is proposed to be applied to the whole of Northern Ireland.

Mr. William Clark: Surely that is wrong. People in different parts of the United Kingdom, whether in Stoke-on-Trent or in Northern Ireland, will not be paying different rates of tax. All that is provided is an accelerated allowance, and once the industrialist has received it that machinery is written off. It is quite erroneous for the hon. Member to say that industrialists would be subsidising development districts. They would be doing nothing of the kind.

Mr. Lever: I do not want to enter into these intricacies, but the Government cannot have it both ways. It is either an inducement or it is not. The Chancellor said this would cost about £45 million in one year and so many millions—I forget how many—in another. In fact, the Chancellor will find that it costs him nothing because, according to his hon. Friend, it merely defers the payment of tax. Of course, in a sense he is right in saying what he does, but his argument must fail in logic. Either it costs the Chancellor something and gives a gain of some sort to the industrialist going into a development district, or it costs the Chancellor nothing and hence nothing is gained by the industrialist going into the development district. Obviously, if one gives an inducement it costs somebody something. If a fiscal inducement is given to people to go into a development district, since it has to be paid by somebody the taxpayer must pay it. The hon. Gentleman cannot have it both ways.
My objection is not to the prosperous area lending a helping hand to areas of the country that are in difficulties. My objection is to the method chosen to give that helping hand which is

anomalous to other people who are at least as much in need of a helping hand as the development districts and who, far from being helped by the public, are more heavily taxed by reason of the method chosen to help people who are perhaps in better circumstances.
It is high time that this House became more sceptical of all these permutations of compassion and social convenience which are brought out in every Budget statement. Every year Members are busy thinking up hard luck cases of people who have misfortunes in health, who have widows and dependants, a proportion of whose income derives from this, that or the other, in order to procure tax concessions. It should be borne in mind that these tax concessions have to be paid for by somebody, namely those who do not get the concessions.
I am tired of general alterations in the fiscal system that fall to the worthy and unworthy alike, the needy and the opulent alike, at the expense of the general body of taxpayers. Take this as a case in point. Since this proposal will cost the Chancellor something, it is as well to remember that the greater part of the cost will not come from people moving into the area eager to get paper losses in respect of their plant and machinery. As the hon. Member for Belfast, East rightly pointed out, if there are no profits these reliefs are not worth very much. The people who get a e greatest benefit from the reliefs are the people who are already in those areas and who are reasonably prosperous. In these development districts there are many prosperous industries, and it is they who will get the lion's share of all these concessions.
The picture that is presented to the House to justify this remarkable change in our taxation system, of industrialists eagerly thrusting their way into these backward areas where, for 100 or 150 years, people have not been anxious to go, so that these industrialists will be able to depreciate their non-mobile plant more rapidly than in the rest of the country, is false. The concession will fall, for the most part, to the people who are already established in those areas, who will gain as a result immense benefits in the form of tax savings, and the attempt to attract other industry into the areas will fail.
These concessions must be paid for by the general body of taxpayers. Each year


we automatically re-enact these concessions, and this is a case in which the burden borne by the general body of taxpayers will be aggravated. We graft on these little-thought-out concessions which might have had some social advantages in 1880, but which bear no relation to present-day conditions.
I see no reason why taxpayers should subsidise those citizens who wish to make provision for their old age by taking out insurance policies. It is a splendid thing for people who wish to provide for their old age to save, but why they should get tax concessions at the expense of the general body politic is beyond me. I could go through a whole host of concessions of this kind, which were made to individual taxpayers for reasons which were good, bad or indifferent at the time that they were made, but which have no relevance today.
We have brought in a new one here, and, although it has a certain superficial appeal on the principle that nobody shoots Santa Clause, I must say that in reality it represents a lack of thought on the part of the Government who are not prepared to tackle realistically the job of supporting industries in the development areas and in those other areas where unemployment is exceedingly high. The result is that we have now got the principle established that people are only worthy of a concession of this kind if unemployment is general in an area of a certain geographical size. If people are unemployed in an area 10 miles away from which there is a good deal of employment, no benefit is received.
I want to refer briefly to a few other points. It seems a pity to deal with some of these points now. It is a waste of a Second Reading because many of these points could be made in Committee. The argument advanced by the Chancellor against dealing with the gaming situation seems thin. The objection is that if we tax gaming it will go underground. I should have thought that this argument would apply to any tax that has been imposed on income. Nobody thinks that it is a good argument for abolishing Income Tax that some people do not pay it, or will conduct their activities in a way that will enable them to evade the tax. This is a thin argument for not taking the gaming tax seriously.

The other point that I should like to make before concluding on a more general note is that it seems odd that the Government are trying to climb back from their demagogic contortions on the Rolls-Royce car proposal. When they brought in this piece of ill-thought-out legislation as to cars over £2,000, I gave it a rather chilly reception. I feel no warmth for their present modification. First, it is utterly illogical. I should like to know why we are now to have a system whereby, if one buys an expensive car, one is allowed the whole of the price for tax purposes if one keeps the car for a number of years, but that one is not allowed the greater part of the tax if the car is changed at the end of the year. Has the Minister got a sudden enthusiam for people retaining their cars for a great number of years and a rooted objection to people changing their cars every year? If so, it is a new idea.
I cannot see why this principle should apply to expensive cars and not to less expensive cars. If the Chancellor thinks that a person should get the full tax concession on his expensive car only if he keeps it long enough, it must mean that he has some prejudice in favour of people keeping their expensive cars for a certain length of time. The argument advanced was that the tax had hit these Rolls-Royce and similar concerns more heavily than was expected. That is an argument for abolishing the distinction between expensive and inexpensive cars. It is not an argument for creating a new distinction whereby if a man buys a Rolls-Royce car he gets maximum tax allowances if only he keeps it for, say, six years but that he will only get little more than a fraction of that allowance if he changes his Rolls-Royce car every year.
The introduction of this absurd anomaly can only be explained by the Government seeking to crawl back to sanity from their cheap demagogic expedients in the previous Finance Bill. The Government ought to make up their minds. If they wish to grant a certain standard of tax relief to people with expensive cars, it should apply whether they change their cars every year, every third year, or every tenth year. It seems to me illogical that we should seek to create this distinction.
The other interesting point of comment is why leave the matter at cars? Why


should the Government think that they ought to decide, by way of a general rule, what is reasonable and what is unreasonable in the way of expenditure on cars? The implication is that if a person spends £2,000 on his car for business, that is a reasonable thing to do and can get tax relief on that money. But if he buys a Rolls-Royce—and without looking at the nature of his business or its turnover or any other matter of that kind—the Government tell him, "You shall not have the normal tax relief for a Roll-Royce".
Why stop at cars? The Government might decide that the office which a man is occupying is too luxurious. The car he is driving around is luxurious, but he can justify the expenditure on that. Why should not we examine and measure, or why should not the Tory Party, in one of its ecstasies of unprincipled demagogy, insert a new Clause in the Bill, laying down that director's room should measure so many square feet for tax purposes, and no more? This absurd rule, which is now being modified in an equally absurd manner, is not to be defended in logic. Or if it is, the logic could be extended in most surprising ways.
I wish to say a word about the abolition of the Schedule A tax. My hon. Friend the Member for Sowerby (Mr. Houghton) was said to be in dignified solitary opposition to the abolition of this tax. Let me say at once that I cannot share my hon. Friend's dignity. But I will dispose of his solitary condition. I utterly deplore the Government's action in abolishing the Schedule A tax. I regard it as a piece of unprincipled Poujardeism on the part of a Government who are desperately wooing the Orpington electorate. [HON. MEMBERS: "The Labour Party said so."] Hon. Members say that, in effect, the Labour Party told the Government to do it. If the Labour Party did, in my opinion the advice was bad. If the Government would only follow the whole of the advice of the Labour Party, the quality of their actions would be improved a great deal.

Mr. J. T. Price: Before my hon. Friend gallops away further than he has gone already, perhaps I may be allowed to remind him, without apology, that I led such advice as was given. I advised the Government and my hon. Friends to abolish the

Schedule A tax, and I am glad to say that I had the Full support of the Labour Party in doing so. It is my hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) who is out of step and not me.

Mr. Lever: I did not claim to be the voice of party orthodoxy. I was merely expressing my individual view, which happens to agree with the submissions of my hon. Friend the Member for Sowerby.
The technique of securing support for the abolition of this tax is interesting. First, the tax is mutilated with all kinds of unprincipled detail which allows a great many people to avoid paying it and only the uningenious are left bearing the burden. The tax having been mutilated in this unprincipled way, it is then said, "What a dreadful tax this is. It is high time it was abolished." It is said that the tax is anomalous. But the anomalies have been created over the years. This tax has beer in existence for a great deal of time and it has stood the test of study and continuous scrutiny by informed opinion over the years. It is defendable in logic and reason.
When a man invests in his own house, he should pay a tax on the notional income which he thereby enjoys. The idea that by abolishing a tax we have gained something in the way of removing an anomaly can be demonstrated to be correct. I hope that I am as democratic as any other hon. Member. But when we are dealing with technical, detailed and complex concepts of taxation, it is ludicrous that a swollen popular mob, demanding the abolition of a tax which is justified, should carry weight with the House of Commons. The general unpopularity of this tax outside the House, especially among those who pay it, is not a novelty or exclusive to the Schedule A tax. Were we to subject most forms of taxation to a similar popular vote, we should find an adequate Gallup poll demonstrating mass support for their abolition similar to that which has been advanced in respect of the Schedule A tax.

Mr. J. T. Price: Perhaps my hon. Friend will now apply his undoubted affection for logic and reason to his own proposition. If he says that the abolition of Schedule A tax is illogical, let him apply that to his argument about the


Rolls-Royce car which he mentioned. Why should not a person pay a notional tax for the enjoyment of an amenity, having paid £7,000 for a Rolls-Royce instead of £5,000 for a bungalow in which to live? Let him answer that one.

Mr. Lever: My hon. Friend thinks that he has scored a devastating point by equating a Rolls-Royce car with a bungalow. Those who equate those two articles and think that they may be compared will find his argument overwhelming. I find a wide distinction between a motor car and a bungalow, so I do not have much difficulty in dealing with his point. A car produces an income for no one, as such. We are not here dealing with the pleasure that is produced. A house produces a notional income, because the owner does not pay the rent which otherwise he would pay.
Under the present system if a man spends £10,000 on buying a house, and he rents it to somebody else, he pays tax and gets no relief in respect of rent which he pays on his own house. If, taking advantage of the abolition of the Schedule A tax, a man spends £10,000 on his own house and he has no income, and he pays no Schedule A tax, obviously he will be better off than a man who, for one reason or other, has to occupy rented accommodation. A man who has half his money invested in Government stock, or buys a house which he does not occupy, and if he pays rent for where he is living, will be taxed unfairly under the present system.
If I borrow £10,000 in order to buy a house, I get tax relief on the interest which I pay on the loan. I do not have to account for that relief to the Exchequer so long as I am earning money in some other form. So that the Inland Revenue bears nearly half of the interest I pay for the house. I get tax and Surtax relief on the interest. Another taxpayer who rents his accommodation has none of these advantages.
It seems to me that we cannot abolish the Schedule A tax and, at the same time, enable a taxpayer to borrow money to buy a house and get tax relief on the interest which he has to pay on the loan. To me that seems an absurd situation. Having shown a zeal for

abolishing anomalies, it is high time the Government pursued the matter to a more logical conclusion. We are left with the extraordinary position that if I rent a house for £5,000 or £2,000 a year on a long lease I can deduct tax from the ground rent I have to pay for the house. If I rent it for twenty years or seven years—the same house at the same rent from the same owner —I get no tax relief on the rent I pay. If I happen to take a lease for a longer period I get tax relief on the rent I am paying.

Mr. J. T. Price: Is not the hon. Gentleman forgetting that this legislation is designed to cater for the ordinary citizen and not the tycoon who can pay £2,000 a year? This is for ordinary people who have to have ordinary houses in which to live—people who live reasonable lives and do not enter the rarified and higher realms of high finance about which the hon. Gentleman is talking in order to support an argument which is irrelevant.

Mr. Lever: Unfortunately, my hon. Friend's excitable hyperbole has not been written into the Bill. The rules which I have enunciated apply equally to the other individuals to whom he has referred. If it will assist my hon. Friend to grasp the point more readily, and if it seems more logical to him, let the rent be £100 instead of £1,000 a year. If a person pays £100 a year in rent, he is allowed no tax relief on it. If, however, he rents the same house and enjoys the same income as before but instead of renting it on a yearly or monthly tenancy rents it for fifty years, tax on the rent is deducted at source and tax relief is allowed.
That is a complete anomaly, and if the Government are so anxious to remove anomalies they should pursue the matter to its logical conclusion and since they propose to abolish Schedule A they should abolish any tax relief for people who borrow money to buy houses. There should be equity as between one tenant and another, whether he pays £100 or £2,000 a year. The position remains the same. Either everybody should get tax relief on the rent that he pays or nobody should get it.
I hope that the Government will let us know why they propose this partial


tax relief, which has no principle and which is a surrender to a Poujardeist approach to Schedule A tax. If hon. Members on this side have not understood the implications of the abolition of Schedule A, and even if I am alone with my hon. Friend the Member for Sowerby in being out of step, I still greatly regret the unprincipled abolition embodied in the Budget.
May I deal briefly with more general questions? If what I say takes me outside conventional orthodoxy, again I regret it. I do not subscribe to the popular myth that the Government deflate between elections and inflate in order to win elections. This is an interesting myth which, not unnaturally, is favoured more on this side of the House than on the other, but, curiously enough, it is one to which hon. Members opposite are not altogether resistant because it has flattering as well as unflattering implications. First, it implies, as is not the case, that the Government are in a position to produce roaring prosperity on demand in order to win an election. Therefore, even if, as first sight, the charge is repugnant to Chancellors of the Exchequer, on the other hand, it has certain flattering grandeur, and the Chancellor is inclined to suppose that he produces these clever adjustments in our economic planning.
Of course, it is just before an election that hon. Members opposite are keen to emphasise that they never act except for strictly economic reasons. Now a new theory is advanced by the Chancellor and is elaborated by the right hon. Member for Flint, West (Mr. Birch), namely, that when the economy was overheated, without an eye on the election, the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) found it necessary to cool it down by his measures, and that, now the overheating is gone, the economy is in a sound condition and the Chancellor can recite the massive reserves which he has, and which incidentally he always has had.
The dollar securities and the International Monetary Fund position have improved and some credit is due to the Chancellor for his contribution towards the international atmosphere for strengthening our reserves, but we are told at some length about the reserves

which we possess and that the economy is much benefited by the measures of the previous Chancellor and can be reflated.
The argument is that we have a sound basis on which we can reflate whereas before the economy was in an overheated position and had to be cooled down. This explains why what was good last year is no longer good this year and why this year reflation is good and that last year deflation was good. This theory does not bear any closer examination than the election winning theory. It would be astonishing, after the manhandling which our economy has had on three different occasions by Tory Chancellors, if it could be said that it was in a better condition. It is like saying that, having applied a mallet to the head of a man with a headache, one had improved his headache so that he could do his work with more zeal and vigour than before.
The economy, far from benefiting by the manhandling of "stop-go" policies, has suffered drastically by reason of them. The interventions of the right hon. and learned Member for Wirral have not put the country in better shape to face the future and expand its industries. On the contrary, it is in worse shape as a result. The only respect in which it can be said to be in better shape from the point of view of being able to sustain expansion is that there is a reserve of unemployment and unused resources.
I suppose that in that sense it can be said that the country is in better shape, but this argument is plainly false for this reason. If in fact the economy was overheated when the right hon. and learned Member for Wirral started his manhandling; of it, and that there was too much demand for labour and not enough span labour, with too many unfilled vacancies and not enough unemployed people to fill them, clearly what was wanted was a gentle touch of the brake. But what we get on these occasions of so-called overheating is a wild series of panic measures of a destructive kind which disturb the basis on which industry has been expanding, upsets every kind of industrialist and produces the general discontent and inability to look ahead by reason of "stop-go" policies. One does not apply a gentle touch


of the brake by leaping into a 7 per cent. Bank Rate. That is obviously a panic measure.
Therefore, we need not treat too seriously either the political theory about "stop-go" policies or the latest theory advanced by the Chancellor of the Exchequer and his supporters that we should slow up when the economy is overheating and go full out once we have put the matter right. That is false, too. The truth is that the "stop" part of the "stop-go" policy has always been related to one thing, and one thing only, namely, the fear of the Treasury that the £ is in danger and, therefore, the reserves have to be defended. It has nothing whatever to do with our export surplus, or the general condition of the economy.
In 1957, when the panic measures were taken, our export surplus was running at a rate which we would envy if we had it today. We were running in spendid condition in 1957. Now the country is supposed to be in excellent condition as a result of its being kicked in the teeth and generally mauled by the former Chancellor of the Exchequer and raring to go for expansion. In 1957, on one of the occasions of this sort of mauling, the country was exporting far more satisfactorily than it is exporting at present and running a splendid export surplus. Notwithstanding this, there was a temporary run on the £ and, as a result, the whole apparatus of deflation was imposed on the country, greatly to the disruption of its economy and greatly to the disruption of our financial and economic affairs generally.
It is this which has to be looked to, not the date of the General Election, nor the supposed overheating of the economy, if we want to understand why Tory Governments from time to time take these panic measures. They have taken them in the past because, rightly or wrongly—in my view, wrongly—they have panicked on the question of runs on sterling.
It seems to me that, if we want to avoid this happening again, and if we get another Chancellor like the one we had before, we must ensure that our sterling position is reasonably strong. I completely support the right hon. Member for Flint, West in his view

that we should all set our face against devaluation in whatever form it is presented to us—whether in the form of a floating £ or in any other form. He spoke in terms of it being a moral question to preserve the value of the£ in the interests of the holders of fixed interest securities. If that is a moral question, the Government are in very heavy moral default to the holders of fixed interest securities, like War Loan, who have been robbed of their savings by the Government's financial manipulations.
I have pointed out before that the Government treatment of our gilt-edged securities is such that the lottery bond has become the least speculative of all Government investment. This should have been borne in mind when the right hon. Member for Flint, West was speaking about the moral default involved in devaluing securities. I know that my hon. Friend the Member for Westhoughton (Mr. J. T. Price) will be relieved to hear that I am absolutely in tune with Labour Party policy in saying that we should set our face against any form of devaluation of the £ and any form of gimmick treatment of the £ and that I absolutely support any measures for the stability of the £.
There is another reason for this, apart from those which I have heard advanced today. To me, the great reason against devaluing the £ is not that it will disrupt trade, that it will be Of only temporary value to the country, or that it will afflict old-age pensioners. The greatest objection, in my opinion, is that the financial and economic security of the country, like our political security, can only be obtained collectively. Unilateral action taken to produce security for this country is a pipedream. It cannot be done. I do not mean that we must not play our part by looking to the international institutions which will give us collective security for the£ as well as political security. I welcome the speech that the Chancellor made recently and the approach that he has shown on this subject. He shows a totally different viewpoint from the 7 per cent. thumbscrew treatment which his predecessors in office from time to time have used to deal with this problem.
I suggest also to him that, although we must look to national steps being taken


to strengthen the £, the International Monetary Fund and all the arrangements that we can make with the central banks of other countries, there is no such thing as a balance of payments problem looked at from the point of view of all the main countries of the world. The problem exists only for countries individually, and is solved the moment that it is dealt with in any sort of harmony by the major countries of the world.
I should like to see the Chancellor show a little more imagination in protecting sterling from these runs. I suggested a few years ago that we might have protected sterling from some of the sales of sterling within the sterling area by providing adequate hedging facilities in this country. Very little thought goes to these problems, and I think that at last the Government are trying to experiment with the idea that there can be a different rate of interest for some marginal foreign borrowing from that which prevails in the country as a whole.
This has been a grave defect of the Tory Government in the handling of our currency crises. Every time that there has been a run on sterling, the Treasury and the Bank of England have rushed into raising the rate of interest. This has produced the result that to get marginal increases in the amount of money that has been put into this country so as to tide us over a temporary crisis we permanently pay huge additional interest on much vaster sums than the small marginal sums involved.
I will put it this way: if we want to attract £200 million or £300 million extra borrowing money into this country, the rate of interest is put up and we pay an increased rate not on the £200 million or £300 million, but on £2,000 million or £3,000 million. I have not the figures in my head, but it is astonishing how with a negligible increase in the National Debt the interest charges on the National Debt has risen during the years of Tory Government. We are paying enormous sums of interest on our National Debt although the Debt has hardly increased at all during the last twelve years. Perhaps the Chancellor will give the figures when he replies to the debate.
What is the state of the National Debt? What is the percentage increase of the Debt since 1950, when the Conservative Government came in and the percentage

increase on the interest payments which has to be made upon it? I think that the House will be startled by the figures they get in reply.

Mr. Percy Collick: If my hon. Friend will kindly consult HANSARD he will find that I had a Question dawn to the Chancellor on this very point only about a fortnight ago. I think that he will find himself in error when he says that the National Debt has not substantially increased during the last twelve years.

Mr. Lever: It has not increased in any way comparable with the amount of interest paid. The amount of interest paid on the National Debt itself has gone up enormously, whereas the Debtitselfhas increased relatively little. It is the rate of interest that has gone up on the Debt which has caused a serious burden on the balance of payments. It is time that the Government evolved a system whereby, if they really think that some help is needed in the temporary crises in attracting hot money to this country, they should do so without this additional penal cost to the National Debt, to say nothing of the total dislocation of all financial business throughout the country that follows these rates of interest changes.
Because the Government want to bring in £200 million or £300 million of hot money from abroad, local authorities have to plan their house-building programmes on totally different calculations and industrialists in their factory plans have to make their computations on a totally different basis. I should have thought that it was high time that the Government abandoned this notion of salving our temporary crises problems by sales of sterling and this juggling up and down with the rates of interest.
I noticed in the Guardian this morning that there is a suggestion that the local authorities are fulfilling a valuable purpose by bringing money into this country by offering higher rates than the Government offer on Treasury bills. Of course, this idea of solving the problem of payment by the borrowing of money is rather like the old lady who says, "Thank goodness, I have been able to borrow enough money to pay my debts".
That is the sort of attitude of the Chancellor in these temporary crises that beset


us in the raids on sterling. Surely the local authorities ought not to play a lone hand differing from the Government's policy in competing with the Government in borrowing money from abroad. It all puts up the rate, not only for the ratepayers but for the Government, in the end, because the local authorities are able to offer a rate that attracts money which may be and very often is different from the rate the Government are offering to pay to foreigners who want to invest in Treasury bills.
I hope that if we are to have an expansionist plan and move out of the period of "stop-go," which is certainly possible, we will recognise that the way in which we avoid the "stop-go" policy is not to relate our economy to temporary crises in relation to the £ by taking adequate measures to deal with these temporary crises well in advance. I think that requires an extension of the International Monetary Fund and international monetary facilities which should be pressed for.
I think that the way in which the problem was tackled in the past has proved not once but at least three times to have been a miserable failure and has cost the country a great deal in interest payments, including additional pressure on the balance of payments and dislocation of our industry and a general dissatisfaction and inability to engage in long-term planning.
These have been the failings of the Government arid this is the first time that we have seen some signs that the Government intend to have sustained expansion. Such sustained expansion is possible only provided that they can protect the £. I have criticised the Budget in detail and I shall come back to that in principle in Committee. I have spoken longer than I intended, and I now wish to draw to a close.
Our only basis for growth must be that we pay our way in the world. We can pay our way in the world. We do not have to resort to panic measures—the panic measures of the past high Bank Rate and restrictive financial policies of that kind. This does not provide the basis for expansion at all. So far as the basis of expansion is now in our hands, it is because of the improved financial arrangements which have been made internationally, mainly through the Inter-

national Monetary Fund, but also through the central banks. The expansion of our economy can be achieved in a sustained way if we avoid the kind of measures which the Government have imposed upon us three times in the past.
I hope, therefore, that we shall not once again be subject to the discredited arguments which even this Chancellor is seeking to support in his defence of the performance of his predecessors. I hope that the House will insist that in the future, before Draconian assaults are made upon our economy, a better case will be made out than in the past.
I think that the general feeling of the House is that the total amount of the tax concessions is a reasonable one and one which we would support. I always think that those who say that it should be a little more or a little less are rather hopeful of their credit with hon. Members, because none of us knows exactly what is required at any given point of time. What we should urge on the Government always is that they should grope in a practical, undogmatic manner towards the solution of these questions about how much more buying power is required, and the like. I hope that if the Chancellor of the Exchequer finds that he has not released enough he will take action which is open to him in many fields outside the Finance Bill to see that the country at last emerges from the years of unnecessary stagnation and moves forward steadily into a new era of prosperity.

8.1 p.m.

Mr. John Harvey: The hon. Member for Manchester, Cheetham (Mr. H. Lever) has made a speech large patches of which were interesting, and attractive even, and I have heard him make attractive speeches before, but I must say that I have found on reflection that some of his arguments this evening were a little less lucid than arguments I have heard him use on some previous occasions.
Towards the end of his speech he dwelt on the stop-go policies, as he called them, of the Government, suggesting that these policies could have been avoided and were unnecessary, although at an earlier stage he was honest enough to acquit the Government of deliberately seeking to manæuvre the economy into periods of boom just before an election and to arrange those periods of not so boom


after an election. Well, the hon. Gentleman cannot have this argument both ways. If it is true, as indeed it is, that the areas within which any Government can seek precisely to control the reactions of the economy are fairly narrow, and if it is true that action taken by the Government—by any Government—sometimes does not have the desired result as quickly as the Government may wish to see, so that further action is necessary, either in reflation, or in deflating the economy, then I would suggest it is equally true that periods of stop-go are forced upon the Government by actions sometimes completely unassociated with Government policy within the economy. I shall come back to that point a little later in the development of my own argument.
Near the beginning of his speech the hon. Gentleman took up another matter on which I should like gently to cross swords with him. He suggested that the policies which the Chancellor has applied in an endeavour to bring some relief to the development districts were policies which in turn applied undue stresses and strains on areas outside the development districts. The hon. Member sought to suggest that it should be possible to find policies which did not put strains or inconvenience on areas not within the development districts, which did not impose greater taxation on some firms than on others. He then went on to suggest subsidisation of industrial development, which would still, surely, have to come out of the taxpayers' pocket in the end, and which still, therefore, in the end would have to be found mainly by people in the areas most prospering as well as the developing areas themselves.

Mr. H. Lever: I did not object to the money being found from the taxpayer because, obviously, if we are going to help an area in distress we have to pay for it from some pocket. What I said was that we should not do it on a geographical basis or a fiscal basis; we should not restrict the benefit by geographical lines and should not give help in the form of fiscal help.

Mr. Harvey: That is in a sense the argument I am trying to make. Even if we did it in the way the hon. Gentleman has suggested, still in the end the result is geographical, because still in the end

the areas of development are less able to meet the volume of taxation required than those areas which are prospering more than the development districts.
The hon. Gentleman made reference, I think, to the fact that people in this country might object to finding some considerable proportion of their taxation taken away to bring about some development in Fiji, but even that, with respect, is what does tend to happen, because all of us contribute in one way or another towards the provision of aid not only to development districts in this country but to under-developed countries overseas, and in doing that we promote trade to some degree, and therefore can benefit from that, must as surely as we can do it if we find ways of helping development districts in this country.
What I would agree with the hon. Gentleman about is this, that all sorts of ways can be suggested of helping development districts. The hon. Member has made certain suggestions, as indeed did the hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith), but the Chancellor has male other suggestions. In the end, all of them have to be paid for somehow. My argument is that the way in which they are paid for will amount to the same sort of thing in the end whichever method one brings in in endeavouring to help the areas concerned.
I believe that the Chancellor is to be congratulated on the steps he has proposed this year in an endeavour to help those areas. Of course, all of us have constituency interests which we rightly and properly wish to put before the House, but there is no doubt that if we widen over far the area in which we seek to make available the type of help which the Chancellor proposes for the development districts then we shall dilute the capacity to devote the whole of the help which we wish to devote where it is most urgently needed. This really must be borne in mind, and so the areas which are even marginally more fortunate than the development districts have to be prepared to take their share of helping those areas if we are to move forward from the situation in which we find ourselves today.
It is worth remembering that the
type of help which development districts need above all is the sort of help which will bring new plant arid machinery into


operation even in their existing works, quite apart from attracting new types of employment to those areas, because so much of the problem in the development districts derives from the fact that industries which have been great and important industries have found themselves face to face with the very changed world and the very rapidly changing world of the middle nineteen-sixties. Shipbuilding, for instance, is never again likely to be the great industry which it was to this country, partly because the future of shipping itself will not be all that it has been in the past, and partly because so many other countries have found out how to make quite good ships for themselves and regard it as enormously important to their own economies that they should make their own ships, rather than pay us to do it. So these areas have to have new types of employment attracted to them.
In that sense it is of enormous consequence that the Chancellor has encouraged the districts concerned to do something about giving themselves a facelift. He has made it more possible than before for something to be done about housing in such districts where a face-lift can be of the greatest possible value to the morale of the people living there. A face-lift is urgently needed throughout such areas and in itself this can help to attract new industries.
Some years ago, along with hon. Members on both sides of the House, I had the privilege of being invited to Belgium when the policies of the E.E.C. had resulted in the closing of a number of old pits. There was considerable trouble in the Belgian mining areas because of redundancy and unemployment. If my memory serves me aright, the unemployed miners going through courses of training for other industries were paid 90 per cent. of their previous earnings during retraining. I believe that we shall have to face this sort of thing here because, not only in the development districts but elsewhere, we shall meet the problem of redundancy as old industries give way to new ones. It will be essential to get workers to accept the principle of retraining for other types of work.
More and more, it will be the responsibility of the Government not only to

remove from the minds of workers fear of redundancy and of the changes that the country has to face in the years ahead, but to remove the stigma of unemployment, the frustration and the waste of it. The more one can encourage people to retrain for other types of activity in which they may more easily be able to find employment, the more valuable this must be in the long run to the economic health of the nation.
The Chancellor should give consideration to the possibility of encouraging, as soon as may be practicable, arrangements whereby workers taking courses through the new facilities, and, I hope, facilities that already exist—for technical colleges and evening classes can do a great deal to help—in order to re-equip themselves for other types of work, should get very much more than unemployment pay for a reasonable period while doing so.
Hon. Members on both sides of the House, and many people outside, were somewhat disappointed that the Chancellor has found it impracticable to introduce measures for the taxation of gambling and gaming. The critics will at least be encouraged that Clause 2 clearly means to put teeth into the possibilities whereby the Treasury may tackle the problem in future. It is a difficult problem. There is no doubt, for instance, that the dog-racing people feel that they are being victimised under present conditions and are having to contribute appreciably to the Treasury while other forms of racing make no comparable contribution. Nor do any other forms of gambling.
It is, in equity, very desirable that we should, as quickly as possible, raise as much revenue as we can from the undoubtedly large sums of money spent on gambling and gaming. Whatever one may say about the moral issues, large numbers of people want to indulge in gambling and gaming. Therefore, having accepted that, it is perfectly right and proper that the State should find every possible way of raising for itself a reasonable proportion of money out of the pastimes of the people who indulge in these forms of activity.
I know that there are difficulties. I know that it may not be possible to find any very precise way of taxing the person making money from cards in a


gaming room, nor precisely to assess how much "one-armed bandits" yield in clubs in different areas or where the clientele vary widely. But even if the method is rough and ready the Government should aim at increasingly more revenue from this source.
I was delighted to see in Clause 13 that there is to be a much-needed Amendment as to the income of children. It was only a month or two before the Budget that one of my constituents wrote to me instancing his own problems. I sent his letter to the Chancellor and I am sure that my constituent will be delighted to see how quickly my right hon. Friend acted upon the information provided.
Taking the rates of tax on personal reliefs as a whole, I think that the House will still be disappointed that after all these years there has even now been no very dramatic reappraisal of the way in which taxes are raised. I feel that it is about time we moved on to the complete abolition of Surtax and its replacement by a form of taxation which cuts right across income. I am not suggesting that Surtax payers should in the end pay less tax than they pay today—this matter was tackled a year or two ago and can well be left alone for some time—but I am saying that it should be possible to simplify the process while still taking the same amount of money.
Incidentally, given that, I think it should be possible for the Chancellor to give serious consideration to the whole question of the financing of the Welfare State. I gather that hon. Gentlemen opposite are saying something these days about getting away from flat-rate contributions towards graduated contributions, and I understand they have been heard to say something about the possibility that some people at least might pay for some of the benefits they derive.
I said many years ago that, given a fair basis of taxation that is not punitive, that is not a disincentive to effort or ability, I see no reason why we should not go on to consider graduated contributions rather than flat-rate contributions in relation to the benefits that people draw from the State. Under this Government we have gone a long way towards fairer forms of taxation. I would not object if, before long, we were to decide to take a step in the direction of overhauling the whole basis

on which the Welfare State is financed.
A number of hon. Members have spoken about constituency interests. I can appreciate that some hon. Members have very considerable constituency worries. I listened with interest to what was said by the hon. Member for Stoke-on-Trent, South. In Walthamstow we have a number of people employed in the furniture industry. The hon. Member for Walthainstow, West (Mr. Redhead) and I received deputations before the Budget and I know that the workers in the furniture industry will be somewhat disappointed that it has not been possible to do any more about the Purchase Tax on furniture.
Let me say in fairness to the Government that a great deal has been done in the last few years to streamline the whole basis of Purchase Tax and make it very much fairer. Furniture today pays 10 per cent. I sent to the Chancellor a letter in which I urged consideration for the possibility of relieving some types of furniture, from Purchase Tax altogether. I head in mind that he could particularly consider the more essential types of furniture which a young couple need on marrying and setting up home. Their expenses are heavy enough, in all conscience. We should usefully consider how far we can help them. If we could do that and help the furniture industry as well, it would be very desirable.
It should not really be so difficult to specify typos of furniture and to put a price limit on the value of the furniture that can be sold free of Purchase Tax. I do not accept the argument that this would be going back to the old "Utility" scheme, under which an awful lot of very poor furniture was sold immediately after the war.

Mr. Ellis Smith: And some very good furniture.

Mr. Harvey: And some very good furniture—I grant that. Perhaps the hon. Member will also agree with me that if this experiment were introduced today we would find that firms would be competing with one another on a quality basis to get the market for this type of furniture, because there are enough firms in the industry to ensure that quality is kept high.
Far from seeing a lowering in standards as a result of such a step, we might very well find that quite an amount of very good furniture would appear at very reasonable prices, and this would be tremendously helpful, especially to young people setting up homes but not least to the furniture industry which very much needs a shot in the arm. To return to the hon. Member for Manchester, Cheetham and his references to stop-go policies, I consider that the primary reason for the need to stop on two or three occasions during the past few years was very simple, that the appetite of the home market was seriously outrunning our ability to feed that market through our export sales.
The hon. Gentleman said that he did not think that this was so in 1957. Even if it were not so in 1957, it was, if I remember aright, certainly so in 1955, and again in 1960. The House must remember that too often, when circumstances have been a little easier here at home, there has been a tendency for industry to boom into the home market, for hire purchase to put very heavy strains on the £ in relation to the total volume of exports.
As one who has been engaged for many years in the export trade, I know that there has been considerable criticism overseas of the fact that some British manufacturers tend to lose all interest in exports the moment the home market becomes attractive to them, and they tend to interest themselves most in exports only when the home market becomes difficult. Up to a point, this may be quite natural, but a country which depends so much on the export market far its livelihood must inevitably give high priority right across the whole pattern of its industrial activity to a due sense of the importance of its export customers.
We must be willing more and more to meet the sort of specific requirements they make which, in an enterprising way, so many of our competitors meet. It will be incumbent upon my right hon. Friend, I believe, to seek further ways to help and stimulate the British exporter along these lines.
Hon. Members on both sides will probably have read at the weekend, as I did, that a substantial order for aircraft placed

by the Indian Government had gone to France because the credit terms were better than the terms we could offer. The Export Credits Guarantee Department has been given real teeth by the Government, and we must be grateful for what it does, but if it is true that even today we can lose orders for aircraft because the terms we can offer are not as good as those which France can offer, something must be done.
I have only recently returned from India. If it is true that Japan, for instance, can make ten years credit available to India and call it aid whereas the British exporter is denied a similar opportunity because we will not stretch aid to mean ten years credit in that way—I think that our decision is quite right—it is Japan which should come into line in these matters in differentiating between what is legitimate trading credit and what is Government aid but if these things are true, we need to give still further thought to our arrangements through the E.C.G.D. and the type of help we can give the British exporter in meeting situations of that kind.
Although, I am sure, we are all glad to hear my right hon. Friend's references in his Budget speech to providing aid to needy countries overseas, there is an urgent requirement to reconsider the whole pattern of aid which we give to other countries and to codify it, thinking it out in the interests of the receiving countries, in the interests of this country and what we can best produce, and in the interests also of the development districts of this country, as the Chancellor suggested should be done.
British exporters are today losing certain traditional markets because of the aid policies of other countries. In India vast opportunities hitherto open to British exporters are being switched to America, understandably enough because the aid which the American Government can give and is giving is very much greater than the aid which we ourselves can give. But, undoubtedly, if Britain loses its long-term trading position with countries such as India as a result of the aid policies of other countries, there is, obviously, an urgent need for us to reconsider what we do.
This is probably not the right debate in which to try to elaborate this point, but I think that it would be helpful if


hon. Members on both sides would consider helping me to find time, or helping the House to find time, for a debate on the subject of aid and trade. Throughout so much of the world today the two things are closely interwoven. Unless we give aid—Sir Norman Kipping, the Director of the Federation of British Industries made this point in his recent report on India—we shall increasingly be denied great portions of the available trade. Yet, in the end, the investment which we make today by way of aid can pay a handsome return in the future.

Mr. Tam Dalyell: Is the hon. Gentleman suggesting that the Chancellor's idea of giving aid to developing countries from under-utilised resources in Britain, in Merseyside, the North-East, Scotland, and so on, is wrong?

Mr. Harvey: No, I do not suggest that that is wrong. It is perfectly right. What I say is that we shall need considerably to change our sights on this whole question. Aid will have to play an even greater part in the future than it has even done in maintaining substantial portions of our overseas trading interests. I beg my right hon. Friend, in consultation with the President of the Board of Trade, to give immediate consideration to the effect which aid policies adopted by other countries, notably the United States, are already having on areas of our own traditional trade.
This Bill, about which, of course, there must be many opinions and all sorts of argument, gives shape, nevertheless, to a Budget which is well attuned to the needs of the time and the circumstances in which those needs have to be served. We must not overlook the fact that the problems which we face here are not ours alone. Differences in trade are not unique to us. Areas of considerable unemployment are not unique to us. Inflation is causing even more serious worries in France and Germany today than it is here. Different countries in various ways are facing these problems, and, therefore, this is not the easiest or most propitious time in which to ensure a tremendous development of our own trade. But I believe that, within the bounds of what can quickly be done and what we ought immediately to try to do, my right hon Friend's Budget and this

Finance Bill set the country a very good example.

8.35 p.m.

Mr. A. V. Hilton: I am glad to have caught the eye of the Chair today since I sat throughout the main Budget debate without being able to speak. The hon. Member for Walthamstow, East (Mr. J. Harvey) made two points with which I agree. First, he said that it was likely that future changes in industry would mean that workers would have to train for fresh jobs. It is obvious that this would take place. In my view, there would not be very much difficulty in this for the majority of workers, particularly for the younger workers, but older people who have been in their jobs all their working life may not find it easy to train for completely fresh work. Generally speaking, however, I am fairly sure that there will not be great difficulty in getting people to agree to train to new jobs.
I share the hon. Gentleman's disappointment with the Chancellor's statement that the time is not yet right to tax gambling as such. Undoubtedly, there is here a large
sum which could be brought into the corers of the Exchequer when the time is opportune. I hope that it will not be very long before the Chancellor has all the information he needs so that gambling may be taxed.
Like other hon. Members I welcome the main theme of the Budget, which is the expansion of the economy. We all wish the Chancellor well in this effort and we hope that the expansion which is so necessary for this country will be achieved. But the Government ought to be consistent about expansion. I am all in favour of it, but I must point out that this year's Price Review presented by the Minister of Agriculture shortly before the Budget was obviously a restrictionist Price Review.
It is true that in many respects production on the land can be greatly increased. We ought not to be embarrassed in this country because we can produce a surplus of food. We ought to remember the seething millions in other parts of the world who are still starving, Ways can be devised whereby any surplus produced in this country can be diverted to those millions.
I am all it favour of all-round expansion and the Chancellor is obviously right


to concentrate on development districts, for we must obviously have new industries in areas of high unemployment. However, there are other areas where, although the number of unemployed is not high, the percentage is as high as in development districts. These are mainly rural areas where the unemployed are scattered, although when they come together at the employment exchanges once or twice a week, it is a grim sight.
Several hon. Members have made constituency points and I should like to do the same. In my constituency there is the small town of Swaffham where I live. We have a substantial number of unemployed for the size of the area. The main occupation is agriculture and since the war there has been an almost yearly reduction in the labour force. The difficulty in such an area is that there is little alternative employment to absorb those forced to leave the land because of increased mechanisation.
In this area there is an abundance of land which could be acquired at reasonable prices—compared with those paid in London and elsewhere into which industry is moving but where it is not really needed. A number of small market towns in Norfolk have areas suitable for building and greatly need light industry. Only two miles from my home there is a Thor missile base which is to be dismantled in the near future. It is understood that the R.A.F. has no further need of the site. This would be a ready-made site for light industry, for all the services are provided, and it is only two miles from Swaffham, which is an expanding town. I hope that the Chancellor will note what I have said and pass on the information to his right hon. Friend the President of the Board of Trade, so that he can divert light industry to this area.
I am pleased to note that the export situation is improving. I recently read that last month's exports rose considerably, but that was mainly because of the winter backlog and because of strikes in certain ports which had thus been unable to handle exports during the winter months. I am sure that everyone hopes that our exports will soon show a true increase.
As so frequently happens, I think that the Chancellor has failed to get his priorities in the right order, and I will

give one or two examples. It is not long ago that Purchase Tax on motor cars was reduced. I suppose that I must claim an interest, because I bought a motor car and benefited from the reduction. However, personally I would have preferred a reduction in Purchase Tax on things such as furniture and clothing which are essentials affecting the lives of ordinary working people, pensioners, married people with children, and so on. Furniture and clothing are extremely expensive and I would have hoped that the Chancellor would have concentrated more on essentials and less on motor cars and similar articles.
One of my hon. Friends mentioned Purchase Tax on bicycles earlier and, while he spoke from the point of view of the manufacturers, I wish to deal with this subject from the other side of the coin. I suppose we must accept that the Government have given their blessing to the major part of the Beeching Plan arid that, in due course, it will be carried out. It will mean that many rural areas will be completely denuded of train services. Although promises of alternative forms of transport have been given, in Norfolk three or four years ago a branch line was closed and the alternative transport facilities provided were removed only a few weeks after being introduced.

Mr. Deputy-Speaker (Sir Robert Grimston): I am sorry to interrupt the hon. Member. If we are getting on to the Beeching Report we would seem to be getting very wide of the Finance Bill.

Mr. Hilton: I can, in a sentence, relate my remarks to these proposals. I was going to point out that many rural areas like Norfolk are, and will be more so in the future, without public transport. This means that the bicycle will become almost the only form of transport for many people.
Not many farm workers can afford motor cars. Despite this a Government spokesman said in reply to a Question a few weeks ago that the removal of Purchase Tax from bicycles would mean a loss of about £1¼ million a year to the Treasury. That would not be much to the Chancellor, but I can assure him that it would mean a great deal to people living in the rural areas who are deprived of any sort of public


transport but who must get from their villages to the towns, to the shops and so on. I hope that the Chancellor will reconsider alleviating the burden that falls on these people and that he will, perhaps, eliminate or reduce the Purchase Tax on bicycles.
A number of hon. Members have referred to Income Tax. It should be remembered that the people who really should benefit from the Budget are not getting anything out of it. For instance, a married man with two children now earning.£10 to £12 a week does not at present pay any Income Tax, anyway. The fact that he will not be required to pay any in future—although his National Insurance stamp will cost him more—does not give him much satisfaction. It is doubtful whether more than a very small percentage of farm workers, including the majority of those employed in my constituency, will benefit from the Chancellor's Income Tax proposals.
Time is short and I had not intended to speak for long. I will conclude by merely reminding the right hon. Gentleman of what I said about the passibility of light industry coming to Norfolk and similar areas. We should like to play our part in helping him to achieve the industrial expansion which he so much desires. If he will give us the light industry which we want, then we shall be able to help to do that.

8.51 p.m.

Mr. Leonard Cleaver: I hope that the hon. Member for Norfolk, South-West (Mr. Hilton) will forgive me if I do not follow him too far into his constituency problems, but I support him in his appeal to the Chancellor to look again at the Purchase Tax on bicycles. I hope that this will not be another case of an industry getting into serious trouble—and it is already in trouble—before it is given some help by the Chancellor in taxation relief. I support the hon. Member in asking the Chancellor for some reduction in Purchase Tax on bicycles.
I welcome the Bill. The Clauses to which I particularly wish to refer are those which relate to depreciation, particularly Clause 38, which provides for free depreciation for those people who have factories in development districts. I am sure that this will be an

incentive to manufacturers to put up their plant.in those areas knowing, as I do, what a manufacturer will do if he thinks that he Will be given a tax advantage.
My hon. Friend the Member for Nottingham, South (Mr. W. Clark) pointed out that this is not an advantage at the expense of other taxpayers, but merely an acceleration of depreciation for wear and tear which would be due in any event. For that reason the proposal in the Bill is to be supported. But I am sorry that my right hon. Friend has decided to deal with the problem of development districts and of attracting 'industry to them in this way. I should have preferred him to make better grants for capital expenditure which is incurred in the development districts and still to allow free depreciation, not only in development districts, but all over the country. It is a great incentive to manufacturers of all sizes if they feel that what they adopt in their accounts is allowable in their computation.
If one looks at the history of depreciation one realises how absurd is the present situation. The board agrees to the depreciation which should be applied by the firm. It includes that figure in its costs, and its prices are based on those costs. That rate of depreciation is then approved by the auditors. It is included in the annual accounts, which are circulated to the shareholders, and in the annual general meeting the shareholders approve that depreciation. Lt is published to the whole world. I should have thought that it would have been conclusive to the Inland Revenue that that is a fair depreciation to be charged in the accounts of the firm.
But not a bit of it. We have to have a separate wear and tear computation, which creates a good deal of trouble and expense to arrive at what is to be agreed. I can welt understand the Inland Revenue feeling that there might be some unfair charging of depreciation if it were on a free basis for the whole country. But I point out two features. First, if one charges too much depreciation in one year there is no depreciation to charge in the following year and more profit will accrue to be taxed by the Inland Revenue. Secondly, and better still, I suggest that this free depreciation could be allowed in all cases where there


is an agreed scheme for depreciation between the Inland Revenue and the taxpayer.
Another small point on which I feel fairly strongly concerns those unfortunate people who have to buy invalid carriages so that they can carry on their lives and get themselves about the country. I realise that the State has an excellent welfare service which, in the majority of cases, provides an invalid carriage for the unfortunate disabled person, but there remain a number of people who buy their own cars or vehicles and make no claim on the Welfare State for this facility. I wish that my right hon. Friend had included in the Bill a Clause which would have allowed such people a small allowance, say, £50 a year, to meet the expense of their vehicles which they buy instead of going to the State for an invalid carriage.
I heartily welcome the Clauses which have been included for the abolition of Schedule A. As one of the people who, five or six years ago, started the campaign for the abolition of this tax, I welcome them all.

8.55 p.m.

Mr. Percy Collick: My hon. Friend the Member for Sowerby (Mr. Houghton), in a very powerful speech, put the Opposition's main criticism of the Finance Bill in a cogent and what I thought was a completely unanswerable way. I only wish that his speech could be as understood as widely as I should like it to be understood by the people of the country. Whatever the Chancellor says when he attempts to reply, my hon. Friend's case was so effective that I can see no adequate answer to it.
I have one or two brief points to make, but before I come to them I want to emphasise a point which has already been made. Last year the previous Chancellor of the Exchequer came to the House and increased taxation by roughly £290 million. When he gave him the sack the Prime Minister said that there was to be no change in policy. But within a few months the new Chancellor produced a Budget which completely reversed the process and distributed tax reliefs of an almost equivalent amount to reverse what the Chancellor had done the previous year.
To say that this is continuity of policy is, in my opinion, humbug. My hon. Friend the Member for Sowerby was right when he said that what we want from the Government in these matters is a little more common honesty. That is what we have not had and what we get so infrequently these days.
The Chancellor is this year making one or two adjustments in personal allowances, and I only wish that he had gone a little further on the lines that my hon. Friend the Member for Sowerby and others of us have urged again and again. I still hope that he will do something in this connection between now and the Committee stage. For instance, we have repeatedly pleaded for increased taxation relief for disabled people. Last year, the then Chancellor conceded a relief to the totally blind of £100, but when we urged the case of reliefs for blind people with guide clogs, we were rejected.
We pleaded that the totally disabled who, in spite of their incapacity, are able to continue with some sort of employment, should be given a travelling allowance of £100 a year, as was recommended by the Royal Commission, to help them carry on and to ease their burden. These people have to employ private transport to take them to and from their work. That plea was rejected. In my constituency, and in many other constituencies—this occurs mainly in industrial areas—there are a very large number of totally disabled wives. Because a working man's wife is physically disabled, or totally bedridden, he has to get domestic help. We have pleaded again and again for a tax relief to help that man meet the expense of domestic help, but our plea has been rejected.
I ask the Chancellor to look at these matters closely. I do not care which Government does it, but I am convinced that in these cases there is an overwhelming case for relief. Everyone knows that the total amount involved is hardly worth considering, but it would be an enormous help to those who are struggling in great adversity. I hope that something will be done, and I give the Chancellor this notice so that he has a chance to review the matter between now and the Committee stage.
I am profoundly disappointed that the Bill gives no Purchase Tax reliefs. Last year, the right hon. and learned Member


for the Wirral (Mr. Selwyn Lloyd) imposed Purchase Tax on what is called
"confectionery", and additional Purchase Tax on clothing and furniture. When the present Chancellor found himself able to give reliefs, I should have expected him to deal first with this impost. What is the Chancellor's policy? Does he intend justifying a further increase in indirect taxation, or does he really intend doing something about it?
The furniture industry on Merseyside—this applies to other parts of the country, too, although my interest is, naturally, with conditions on Merseyside—is suffering quite unusual depression, and furniture workers are unemployed. There are now 40,000 or 50,000 unemployed men and women in the area, and anything that the Government can do to help decrease that number needs to be done. Particularly in view of the small yield from this taxation, there is an overwhelming case for removing this impost on furniture as quickly as possible. I hope that the same will apply to clothing. Clothing is a necessity, and it is a fairly big item in working-class homes.
The right hon. and learned Member for the Wirral—I am sorry that he is not here—for reasons best known to himself imposed Purchase Tax on confectionery; at least, it is supposed to be a tax on confectionery, but it is imposed on one particular type of biscuit—the chocolate biscuit. Cadbury, one of the country's biggest makers of chocolate biscuits, was persuaded by a number of people, and influenced by the Government to some extent, to set up just outside my constituency a modern factory in what is virtually a development district, and has given employment to a large number of people.
I will not weary the House with a lot of technical detail, but Cadbury says, as is obvious, that chocolate biscuits are more biscuit than chocolate.
Whereas there is no tax on an ordinary sweet biscuit of any kind, if it has a dab of chocolate on it or round it the biscuit is subject to tax. I cannot possibly imagine anything more absurd. No one pretends that this biscuit is a confectionery in any real sense. The result of all this has been catastrophic on the sales of chocolate biscuits. They have gone down and down. This has an effect

on employment even though such a well-known firm as Cadbury has gone out of its way to try to solve the problem in the most humane way possible.
What is the sense of the Government trying to fashion a policy which is intended to direct industry into a development district when the result is that a firm like Cadbury which came into this area for this very reason is forced to change its intended action by a fiscal step of this kind and employment in the factory is reduced by 17 per cent.? I know nothing about what the Chancellor has to do to make himself familiar with all the details, but I cannot excuse the Financial Secretary. Last year, at least he was familiar with these details. He may have forgotten them in the meantime. If he has, I ask him seriously to consider this matter. This is a firm of high repute and this action on the part of the Government has had an effect on employment in Birkenhead where there is an enormous amount of unemployment. I hope that something will be done about it.
I should like the Chancellor to say something about a more general point. My hon. Friend the Member for Sowerby reminded us that the Chancellor was Chairman of the N.E.D.C. We know what that body is supposed to do, and we are told that we are to work towards an average of 3 to 4 per cent. overall increase in production. I am sure that the Chancellor is keenly enthusiastic behind this aim. We are also told that because of this target we must keep any possibility of wage increases within some sort of national policy, in harmony with this percentage. All this sounds very well, but I wish that the Chancellor knew the minds of some of my constituents on this matter. "Ted" Hill was not far from the facts when he asked, in his own blunt language the other day, how trade union leaders could be expected to justify the present situation to shipyard workers in view of the Govern-men's recent decision.
I express no personal view on this matter, and I do not want to suggest that what was done was done improperly, but I should have thought that after the Government had appointed a committee to look into the salaries and remuneration of doctors they would have thought that if was of sufficient importance to make an announcement from the Dispatch Box.
Instead, the announcement was tucked away in the back pages of HANSARD in a Written Answer to a Question. The result, as I understand, is that the remuneration of doctors is to go up by about 12 to 13 per cent. If I am wrong, no doubt the Chancellor will correct me.
I ask the Chancellor quite bluntly how he can expect industrial workers, including shipyard workers in my constituency, to work towards the acceptance of a modest increase which would be in harmony with the aims of the N.E.D.C. when the Government, by their own choice, follow the opposite line elsewhere. The people are at least entitled to some fuller explanation of this matter than they have yet been given, and I hope the Chancellor will say something about it.
It is strange that in these days, with N.E.D.C. and all the rest of the apparatus, the Government at long last have come round to the idea that there ought to be some sort of planning. We remember what we used to get from the right hon. Member for Woodford (Sir W. Churchill)—a free-for-all. That was the line of Tory policy then. But they have moved away from that now and they at least give lip-service to the idea that there must be some sort of planning; how much and what it should be we are not quite clear, but at least the Government have come round to that view which we have been advocating for years. I am very glad of that, but something more needs to be done.
One thing which has been happening for a long time, and which I hope the Chancellor will keep his eye on, is that one can hardly go to the letter box with out receiving from somebody an indication of an increase in price of some commodity or other. The Chancellor has not yet committed himself in public on this issue. Cannot he make a declaration on behalf of the Government that it is time not only that prices stopped rising, but that there were price reductions? I have put Questions again and again on this issue, but it is quite hopeless. The only Tory Chancellor who has ever made any sort of declaration that prices should be held and even reduced is the present Lord Amory.
Cannot we have from the Chancellor a clarion call to the big businessmen that it

is time that we had a halt to price increases and had price reductions? Anybody who is familiar with company balance sheets must know that some of the fabulous profits made in industry today warrant price reductions.
We should, however, recognise the fact—this ought to occupy the attention of the Government; I know that it will occupy the attention of the Labour Government—that there has been a growth of monopoly interest in this country. Monopoly is now entrenched in certain industries almost to the stage whereby it can determine prices and can put other people in a very uncomfortable position if they do not toe the line, despite the Restrictive Practices Court, which is a facade rather than a reality.
I say to the Chancellor: for goodness' sake make a public declaration on this matter if you seriously expect any wage line put out by N.E.D.C. to become generally effective in the country. For goodness' sake urge big business to bring prices down. I know the Government sufficiently well to appreciate that they have the ear of big business, and they should say something strongly to urge it to make a deliberate effort to bring prices down and certainly to prevent them from rising.

9.15 p.m.

Mr. Tam Dalyell: First, I wish to attempt some unashamed bloodsucking on behalf of the soft drink manufacturers. I think the House will agree that they deserve to be specially singled out for leniency on the part of the Chancellor. Theirs is a trade which is peculiarly sensitive to increases in price. When the hon. Member for Blackpool, North (Mr. Miscampbell) was speaking about the troubles of his constituency and about problems which are seasonal and problems regarding tourists, I thought those the sort of arguments which could be applied to the difficulties of the soft drink manufacturers, certainly in my constituency. Some of them, who give a good deal of employment, are in real trouble and perhaps we could look on their difficulties with charity.

Mr. Niall MacDermot: Cannot my hon. Friend the Member for West Lothian (Mr. Dalyell) confirm that the argument advanced in favour of this tax—that the vast majority of soft drinks


are consumed by teen-agers-is strongly contested by the industry?

Mr. Dalyell: That I would confirm.
I turn now to a problem of a very different kind, that of the amateur sports associations. Replying to my hon. Friend the Member for Walthamstow, West (Mr. Redhead), the Economic Secretary said he was afraid that the necessary information concerning the amount of tax derived from amateur sports associations was not available. I think that it should be available partly because the Treasury may have taken some cognisance of the Wolfenden Committee's Report. I offer no apology for quoting from paragraph 161 of that Report:
Our evidence has also shown us that a number of the Governing Bodies of amateur sport feel bitterly about their liability to pay tax on their annual surplus, in the same way as a trading company. They claim that it places an additional and unnecessary handicap on their work of developing their sport for the general welfare of the community. It does indeed seem unreasonable that income tax should be charged on income which is in many instances the sole source of revenue enabling an amateur non-profit-making body to do its work. So far from accepting the justice of their liability to income tax, we are recommending that statutory grant-aid should be available to enable such bodies to extend their work of coaching and development.
In the light of the Albemarle Report, I make no apology for continuing to quote:
We know that the law of income tax is a highly complicated and specialised field and we would only intrude into it with diffidence and hesitation. But even though any amendment to the definition of a legal charity may be impracticable, is the-re not room for offering exemption from income tax to a new category of non-profit-making national bodies concerned with the development of amateur sport?
Coupled with this, I have a profound objection—I am glad that the Minister of Education happens to be present—to what one might call a tax on learning. Not so very long ago I took a party of pupils shopping in Leningrad. This was instructive and it is against this background that one has to see the sort of argument. When the pupils went into shops, they discovered that, for the price of a small bag of rather indifferent sweets, they could get science textbooks. Three hundred pages of scientific knowledge for the price of a small bag of sweets!
I am not suggesting that we should fiddle round our economy to the extent that the Soviets are doing to enable im

provements among the young to take place. But, nevertheless, it is a bit hard that there should be the maximum rate of Purchase Tax on records, particularly records used in language laboratories. I quote as examples René répare sa petite moto, 25 per cent. Purchase Tax; Le Zoo de Vincennes, 25 per cent. Purchase Tax; Marcel va faire une omelette, 25 per cent. Purchase Tax; René écrit à son oncle Octave, 25 per cent. Purchase Tax; La Sainte-Chapelle, 25 per cent. Purchase Tax; Sur les quais de la Seine, 25 per cent. Purchase Tax; Dans le métro, 25 per cent. Purchase Tax. In addition, there are the booklets which accompany the records costing 15s. on which the Purchase Tax is 3s. 9d. Thus, two booklets costing £1 10s. carry Purchase Tax of 7s. 6d. Activity books to help teachers cost 12s. 6d., and each record booklet of only ls. 8d. carries Purchase Tax of 5d.
One disputes not so much the figures but the whole principle of making learning more difficult than it otherwise should be. Although, perhaps, we should not go as far as the Soviets have gone in facilitating, through the economy, the means by which people can improve themselves, such as records—I do not call them Lays—it seems hard that such purchases should be at a positive disadvantage. There are a number of anomalies which, perhaps, can be straightened out.
As a guest of the Scottish Association of Directors of Education at its annual conference at Pitlochry yesterday and the day before. I found that many people were complaining about the situation in which tables for schools with holes for ink wells were not subject to tax whereas tables equally important and necessary for schools without holes for ink wells were subject to Purchase Tax. The Chancellor of the Exchequer is probably muttering to the Financial Secretary that it is exceedingly difficult to distinguish between tables which might be used by anybody and tables used for schools, but nevertheless is it not possible to make things easier for local authorities which have to do bulk purchasing of school furniture?
The Financial Secretary raised a new point when he said that an area which ceases to be a development district can still enjoy some of the advantages


offered by the Budget. Will he make plain, perhaps in pamphlet form, at what stage a claim, if made, will be valid? A good deal of confusion exists among industrialists in areas such as West Lothian and it would be to the benefit of such areas if any misgivings could be cleared up as soon as possible. There is a certain amount of confusion particularly about what happens to free depreciation should an area at any time cease to be a scheduled area. If this were in black and white and covered as many contingencies as possible, perhaps these recommendations would be much more effective.

9.24 p.m.

Mr. Cyril Bence: I wish to take up the point made by my hon. Friend the Member for West Lothian (Mr. Dalyell) about removing Purchase Tax on means of education such as records and books. However, I wish to relate what I have to say to gymnasium equipment.
A new factory has been induced to come to my constituency, which is a development district, and it is making gymnasium equipment. Like, I dare say, many of the older generation, I was brought up in a Welsh village where the children could indulge in climbing and sporting activities in the woods and fields. We had access to all the fun and games we could create for ourselves. However, these facilities are not available in urban populations and the big conurbations of our modern, complex society.
Good gymnasiums attached to our schools provide an opportunity for children to do the sort of things that many of us had the jay of doing in the countryside well away from built-up areas. I was shocked when I found that gymnasium equipment bore a Purchase Tax of 25 per cent. Most of this equipment goes into our schools and is paid for by Government grants, but there is a Purchase Tax on it and this seems to me to be a piece of nonsense.
What difficulties are there in abolishing Purchase Tax on gymnasium equipment? The bulk of this equipment goes to institutions which provide athletic amenities or general health treatment. Surely Purchase Tax could be completely abolished on this equipment. It is not difficult to distinguish gymnasium equip-

meat, vaulting horses, climbing boxes, ropes, springboards and chest expanders from other sorts of equipment. All this sort of equipment goes into gymnasiums. Surely it could be specified. I cannot understand why the Chancellor should continue to impose what I consider to be an extraordinary tax.
My hon. Friend the Member for West Lothian quite rightly expressed alarm, as one of the younger generation, at any imposition that frustrates learning. I would give that first priority over the proposition that I am making, but I am sure that he will agree that physical training is very important—perhaps not the first essential—in the balanced education and training of young people. I hope that in Committee the Chancellor will agree to abolish this tax. I do not know the amount of money that is raised by Purchase Tax on gymnasium equipment, but I do know that the school building programme for the whole country is very large and that there must be a vast amount of gymnasium equipment going into those schools. I imagine that as the Government make probably the biggest contribution to the purchase of this equipment for the schools through the block grant to the authorities it would be an easy matter to abolish Purchase Tax on gymnasium equipment.
There is also the question of Purchase Tax on soft drinks. When this tax was put on in an earlier Budget, I thought that it was a shocking thing to do, especially as those of us who are motorists are being asked to stick to soft drinks, lemonade, bitter orange, or the bitter lemon, and keep off the other stuff. I should have thought that to put a tax on the products that we are told we should drink if we intend to drive, was very undesirable indeed.
We have the abolition of the Schedule A Tax—I am glad to see that that has gone—but I was disappointed that the Chancellor did not do something, as suggested by the hon. Member for Huddersfield, West (Mr. Wade), about the tax on building societies. We become members of building societies because we save through them and they finance the purchase of homes. There is nothing more desirable than that. People should be encouraged, without excessively burdening themselves or imposing upon their wives and children any serious fall


in living standards, and particularly food, to acquire their own homes.
There are many people paying 6¼ per cent. or 6½ per cent. interest on loans from building societies and it constitutes a very heavy burden among many young people who are tired of waiting for houses. I have met young people paying as much as £27 a month in interest to building societies. The societies, naturally, have to work to commercial rates of interest.
I should have thought that the Chancellor could have done something in the way of tax relief in this direction, so that the building societies could be in the position which, if my memory serves me aright, they once had. I have not done my homework on this aspect of the matter, but I think that it was three or four years ago that the Government introduced a change in the taxation laws relating to building societies. Before the war, anyway, there used to be a general agreement with the building societies on a block payment of taxation. It was based on a different principle from that for the taxation of ordinary commercial enterprise, but it was changed some few years ago, perhaps about 1957 or 1958.
I shall look this matter up before we go into Committee on the Bill, and I hope that the Chancellor will, before then, re-examine the taxation of building societies. I agree wholeheartedly with the abolition of Schedule a tax. I always thought that it was a very unjust tax. At the same time, I think that there should be some relief of building societies' tax. After all, it is not a profit, really, is it? It is a surplus arising out of their operation of financing their members' purchases of property, a surplus which can be used for financing more purchases.
In my view, it is unjust that this should be taken away by the Chancellor of the Exchequer in taxation as though it were a profit, because it is not. There is no capital appreciation. Looking back,. I wish to goodness that I had invested in equities instead of the building society of which I am a member. I should have been a much richer man today. Nevertheless, I am sure that what I did was socially the more desirable thing to do. I hope that the Chancellor will further consider the position of building societies.
The last point I want to make is on this new proposition of the Chancellor about depreciation. I support this wholeheartedly. I know of companies in development districts which have not made a profit for eighteen months. I shall not mention any names, because that would be commercially undesirable. The way the order books are going at present, the way they are declining, those companies are not likely to make any profit in the next 18 months. It will be some time before they can do much writing off. I believe that I am right in assuming from the Chancellor's Budget speech that should they not make any profit for three years they can tot up depreciation when profit comes and that they will then be entitled' to it. I think that is the correct interpretation. If so, I am happy about that.
Technology is moving so fast today that industrialists, whether in development districts or not, in order to keep abreast competitively both at home and abroad, cannot afford to wait till a machine is worn out before writing it down. It is not a question nowadays, as it used to be 40 or 50 years ago, of a machine being worn. Machines are out today not because they are worn out mechanically, but because the technicians, scientists, engineers, are producing machines faster, such a machine as will perform the functions which four separate machines did before. Today we have integrated machines. People have to write machines off and scrap them long before their mechanical use has been completely exploited.
Therefore, the proposition for writing off capital equipment must be expanded. The Chancellor is ready to start in the depressed areas, but the process of free depreciation of machine tools must be applied all over the country if we are to see the productive efforts of our engineers and young creative scientists flowing faster and faster into industry.
Throughout the country, one can see machines in excellent condition doing a good job on a limited scale. But one knows very often that they are really out of date. Recently, I saw a good batch of machines, but I doubt whether they will be used again, for they are out of date. Yet they were not manufactured many years ago. At a recently opened factory in Scotland, I saw mechanical


processes which have cut the labour force by 70 per cent. I have been out of the motor industry for only twelve years, but this was new to me. These are very expensive machines. Yet, who knows but that in three years a production engineer will not make them out of date?
There is a very strong argument for helping industrialists to depreciate their capital equipment in order to keep up with the new production techniques science is bringing forward. This would help the country to compete in the markets of the world.

9.36 p.m.

Mr. Forbes Hendry: I want to intervene very briefly, despite the time, to make a plea for a section of the community which is very often forgotten at this time of the year when we are discussing the national finances—the churches and the independent charities. At this time of the year, most of us are subjected to pressures from all sorts of groups wanting tax concessions and their special interests attended to. Meanwhile, however, the churches and charities work away quietly and nobody seems to remember them. Indeed, very few people remember them until they require their services, by which time it is usually too late and the organisations are hampered in what they can do in their necessary work, very often through lack of finance.
This situation is very largely due to the system of taxation which has its biggest impact on those classes who were the principal support of churches and charities in the old days. Now a rich man is subjected to all sorts of taxation which makes it impossible for him to do for these organisations as much as he would like.
It is, of course, possible to give a covenant to a church or charity which enables the recipient to recover the Income Tax, but some years ago, for good reasons at the time, the Surtax concession was withdrawn. I suggest that the time has arrived when the Surtax concession might be restored. It would be of tremendous advantage to a recipient church or charity, it would confer no advantage on the person making the contribution and it would be a very valuable step in maintaining

these organisations which are daily falling into more difficult circumstances.
My right hon. Friend should go further and give thought to the system which has worked exceedingly well in the United States and Canada. I do not suggest adopting it in its entirety, but where a person gives a contribution to a church or charity beyond the normal amount which anyone might be expected to give, he should be able to get some sort of concession not for himself but for the recipient charity. Where any person gives more than £10 a year, the recipient church or charity should be able to recover the tax.
A tremendous amount of wealth is concentrated today in the hands of great corporations. I believe that they cannot have this kind of covenant, and in any case very often their profits vary from year to year so that it is impossible to tie themselves down for a period of seven years. My right hen. Friend might in such cases allow a very small proportion of the profits to be charged in the accounts as the expenses of running a business under Schedule D, in the same way as ordinary business allowances are charged. A very small amount—say, 1 per cent. of profits—could make a very great difference to the churches but little difference to the Treasury.
In 1955, the Royal Commission expressed the opinion that it would like a tax concession charge given in the form of an allowance to the recipient. That could be done in a simple way. If these expenses were to be vouched, there should be no more difficulty in vouching them than in vouching business expenses.
The churches serve an extremely important part in the life of the community. A great many people forget about them until their services are needed. Something on the lines I suggest would enable them to carry on while they are forgotten, even in the Welfare State. Charity which still works on quietly and unobstrusively plays a very valuable part in our national life. I appeal to my right hon. Friend to remember that the churches and charities are valuable institutions and to see if he could make some concession before the Bill becomes law.

9.43 p.m.

Mr. G. R. Mitchison: The Chancellor must stand rebuked for having taken such vigorous steps to keep an eye on the "bookies" that he has not been able to look sufficiently at the churches. One has some very interesting matters raised towards the end of these debates, first on the Budget and then on the Finance Bill. One begins to crystallise one's own thoughts about it.
The more I have heard during these debates, the more I have felt the inadequacy of the Budget as a whole. It is not that there is much wrong with a good many of the proposals, but they are insufficient. They are insufficient for the purpose which the Chancellor himself recognises as one of prime national importance today, that is, to have the 4 per cent. rate of development which the N.E.D.C. recommended, which, by now, since we are late in starting, will have to be more than that, and which must carry with it—it may well be that here is the rub—a higher percentage of exports. The more I think about the Budget, the more I consider the Bill, and the more I listen to debates about it the more do I feel that for these purposes the right hon. Gentleman's polciy will not do what is required.
This is a matter of balance, and the Chancellor is quite right to put his object as expansion without inflation. But he runs little risk of inflation while, unfortunately, not having enough chance of satisfactory expansion. We are all guessing. Good heavens, we know it by now because in the last Budget we had expectations which have proved to be completely off the mark. We had expectations from the Government of the day, with all the resources of the Treasury and their other skilled advisers behind them, which proved absolutely wrong. They were right for about six months, and then, if I may use the expression, they went cock-eyed. I agree, therefore, that one comes to one's own conclusions with some hesitation.
I have been struck by what one finds in some of the tables produced for us in the White Paper. I take, first, the Estimates for 1963–64, Table XIII, after the Budget changes. For Income Tax—the Finance Bill is concerned a great deal with Income Tax—the estimate for 1962–63 was £2,790 million. The out-

turn was £2,818 million. The present estimate is E2,789 million, that is, practically the same, only £1 million off the estimate male a year ago. It speaks for itself. When one turns to the other figures with that sort of estimate in mind, one wonders how right or reasonable the estimates were on which those estimates had been founded. They were, of course. estimates of what the position would be without the. Budget changes and then estimates  the effect of the Budget changes.
Turning to the Bill as a whole, I begin with the personal allowances. I do not propose to go into them in detail. In the current year, their effect amounts to £186 million, and £246 million in a full year. The obvious comment here—I have heard nothing to invalidate it—was made by my hon. Friend the Member for Sowerby (Mr. Houghton) at an earlier stage. He said that the butter is on very thin indeed. So it is. It is reasonably widely spread, but anyone who was hoping that the changes would make a very large difference in comparison, for instance, with price changes will find that his hopes were set too high.
A married man with two children with an income of about £20 a week will gain about 8s. a week, and, as my hon. Friend pointed out, there is an increase of 3s. in National Insurance contributions. This is a very Small amount in a Budget which is intended to push up production and which, to some extent, is bound to push up prices. Moreover, that is the type of person who is intended to be benefited specially by the Budget.
I compare that with the alternative which has presented itself to many hon. Members, mostly on this side of the House. Why has the Budget practically nothing in it about indirect taxation? There is not a word about Purchase Tax. I should have thought there was a good deal to be said for doing about as much by Purchase Tax changes as was being done by allowances in Income Tax. Even if that were too much, there is a case for doing something about it. We have heard the grievances of chocolate biscuits. Bicycles ate thundering in the offing. All sorts of constituency points are raised.
But the substantial point is that, if the object of the Budget is to produce expansion without inflation, then to have taken off some Purchase Tax would have a sobering effect, at least, on prices and would have had a considerably more progressive effect, for this simple reason, that a concession in Income Tax does not affect the quite considerable number of people who have not enough income to pay tax at all and does not affect much the even greater number who have only a small income and who, therefore, do not get nearly as much out of even an Income Tax concession in money as does, say, a Surtax payer.
The figures are that personal reliefs in a current year will cost about £186 million, while the 10 per cent. Purchase Tax—I do not say that I have the most up-to-date figures; probably only the Chancellor has those—yields somewhere about £170 million. It is the same kind of figure and I say no more than that.
This Purchase Tax has a bit of a history. Let us remember that it is the child of an election. The 1955 election ended favourably for right hon. and hon. Members opposite, or those of them there at the time, and they then proceeded to clamp on a 5 per cent. Purchase Tax. They clamped it on the most ordinary household articles, things in daily use in every kitchen, the scrubber of every floor in the land, pots and pans and ordinary clothing and everything of the sort. There it still is. Incidentally, this range of Purchase Tax does not yield as much as the 25 per cent. range, but it hits ordinary folk and I should have thought that some concession on that was called for.
A tax of this kind of course produces some absurdities, whether with biscuits or bicycles and I think that the Government recognise that. We have a self-denying ordinance, dating from the time of the Labour Government, by which we do not go into details of Purchase Tax items in Committee—so we have them raised here; people cannot be kept quiet all the time when the pressure becomes strong enough. The absurdities show that this is a fact which requires a great deal of attention and care, more than it seems to got in all cases.
I turn from that to the subject of Schedule A. This is not a question on

which we need go into the philosophy of the matter. If one starts to work out the philosophy of whether Schedule A is right or wrong, one gets some conflicting and difficult conclusions. The fact is that one gets some very odd results, and I cannot do better than repeat the very simple short example which my hon. Friend the Member for Sowerby gave in the Budget debate on 9th April, when he said:
A man on £800 a year, married with one child, paying rent of £100 a year, will have his tax reduced for this year by this Budget by £14 10s. Another man, also on £800 a year, married, with one child, owning a house assessed at net annual value of £40 and paying £100 a year mortgage interest—same pay, same family, same outgoings—will get a tax reduction of £30 15s. 6d." — [OFFICIAL REPORT, 9th April, 1963; Vol. 675, c. 1113.]
If the House will excuse my being so irreverent, that is financial bunk. Hon. Members can say what they like about the principle of the thing, but the answer is that if Schedule A tax is being taken off—and I am not for a minute saying that it should not be—we have to consider seriously the possibility of a rent concession. The right hon. Gentleman's predecessors said and knew exactly that. Lord Amory said it and the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) said it, and there is no doubt about it with a case like that.
Otherwise, it cannot be fair. Why should this considerable difference in the effect of tax depend on whether a man owns a house or is paying rent for it when we are dealing with the same kind of person, with the same family, with the same circumstances in every respect, except the mere question of title? Is it really that we are so tied to the shibboleth of a property-owning democracy that we cannot give the tenant a fair deal on this business, because that is the way it is working out? Surely something should be done about this, for it is not a matter that we can deal with by Amendment. It has been recognised, so something should be done about it.
On the other hand, the Chancellor may have all this up his sleeve. I do not entirely share the view of some of my hon. Friends that this Budget can have no conceivable connection with a coming General Election. I think that it is bound to have every connection; and we know the history of these things. I shall not be at all surprised, therefore, if the


Purchase Tax concessions are made at a later date. But I shall be more surprised if anything is done in favour of the tenant as against the owner-occupier. We will see what happens.
I turn to the other side of the Budget—the question of the tax concessions which have been made, partly in development districts and partly in other respects, to encourage the growth of production that we admittedly need. These are at present negligible. They are not all technically negligible, but the total amount allowed in the Table in the Financial Statement is £12½ million. It is only after a time that one reaches the figure—which is almost exactly the same as the personal concessions—of £246 million, the maximum that will be reached. In the nature of the case, one cannot give a continuous figure and, therefore, that can be given only as the highest possible figure.
It seems that while one welcomes most of these concessions—and, indeed, they have been suggested by us in previous Budget debates—one must not exaggerate the effect they are likely to have. In this connection, too, I believe that there was room for more to be done. I very much doubt whether an industrialist is influenced to all that extent by a tax concession. I am not saying it is wrong. I think it is right. But something more is wanted and I doubt whether, in the circumstances of the country as I see them, we can afford to wait for the time when these concessions will begin to operate.
It is said, "They will encourage industrialists to come into the development districts, or to put up new plants which they would otherwise not have done." I doubt that and I doubt that it is exactly what is wanted. I am not saying that it should not be done. I repeat that it should but I do not think that it is enough. There are, firstly, the difficulties of the development districts themselves. Several hon. Members have rightly pointed out that what the Government are trying to deal with in connection with unemployment, depression and so on, is something which, in varying degrees, is found all over the country.
I have been talking about Purchase Tax and it is rather dreadful that the industries which are suffering in many ways—and seriously from unemployment—are, in so many cases, the same industries which are affected by the increase and maintenance of Purchase Tax. Furniture

has been mentioned and boots and shoes might be cited in the case of my constituency. In these industries unemployment is widespread throughout the country, but a great deal of it is of a technical nature.
In boots and shoes, for example, one of the real difficulties, apart from changes in the financial structure of the industry, about which I shall have something to say later, is that people are beginning to make boots and shoes in new ways. My hon. Friend the Member for Dunbartonshire, East (Mr. Bence) mentioned this in another connection, which proves that it is happening throughout the country. A great deal of under-unemployment and unemployment can he traced to—sometimes removed from but ultimately traced to—this kind of change. It is exactly what we would expect, and I was not in the least surprised to read in the first Report of N.E.D.C. something which I quoted in an earlier debate and which I will not repeat—that they considered that the spread of new scientific and technical methods into industry—

It being Ten o'clock, the debate stood adjourned.

Proceedings on the Fort William Pulp and Paper Mills Bill exempted, at this day's Sitting, from the provisions of Standing Order No. 1 (Sittings of the House). —[Mr. Maudling.]

Question again proposed.

Mr. Mitchison: I was mentioning what was said in the N.E.D.C. first Report about this. 1 am pleased to see that since that Report appeared, and since the Budget debate, Dr. Beeching, with whom we are all so well acquainted in other circumstances, has said exactly the same thing. He is a member of N.E.D.C., and he was speaking at the Institute of Directors or some other place which I suppose he frequents. As we all know, the Chancellor of the Exchequer is Chairman of N.E.D.C., and no doubt he agrees with Dr. Beeching and that Report of N.E.D.C. in this matter.
If he does, then presumably he agrees that the concession made to scientific research a ad the other tax-free loans, which is what it comes to in the Budget, are quite insufficient in amount and that a great deal of what was offered by way of investment allowances ought to have been supplemented by a far more generous encouragement intended to modernise the British manufacturer. Bluntly,


it is the British manufacturer who, according to N.E.D.C. and, I think, according to Dr. Beeching is at the root of the trouble. This applies not to every one of them but to a considerable number—quite enough to hinder this country seriously in its competition with others.
If I were asked to supplement this part of the Bill—and it needs supplementing—it is in that direction and along those lines that I should like to see it supplemented. If what is wanted is expansion without inflation, and if some money is needed here; and if we are not to think too closely about the Stock Exchange or about coming elections, surely the £27 million in this year and the £40 million in a full year which will be directed towards the reduction of Stamp Duties, largely on Stock Exchange transactions, in all the circumstances, and having regard to the imperative need of the country to increase our production if we are to stand up in competition with other countries, would have been much better directed to that sort of thing than to the other ends which I have mentioned. I do not say that those ends have not their merits but, having regard to the history and circumstances of the last Chancellorship and to coming elections, I should have thought that the right hon. Gentleman would have been better advised to devote that sum to other things,

10.4 p.m.

The Chancellor of the Exchequer (Mr. Reginald Maudling): The issue before the House is whether the Bill should be given a Second Reading. I did not detect a great deal of controversy on this point. The criticisms of the Bill have not been very trenchant. The debate has covered a wide range of points and has gone into such matters as the to on chocolate biscuits, mentioned by the hon. Members for Birkenhead (Mr. Collick) and Birmingham, Ladywood (Mr. V. Yates)—an important point, but not exactly a Second Reading point—chest expanders, and even identification discs for dogs. These have appeared as issues on which the Finance Bill should be judged.
The fact is that the Labour Party have no criticism whatever to offer. That was made very clear, with his usual clarity,

by the hon. and learned Member for Kettering (Mr. Mitchison). He talked about the inadequacy of the Budget and said that it was insufficient to obtain expansion without inflation. He thought that we should not have inflation, and I hope and believe that he is right, but he doubted whether we should have expansion. He thinks that we should do more. Have a bigger deficit? How much bigger than the £670 million borrowing? A bigger deficit might be described as a very big election bribe if we wanted to go further.
The Labour Party is completely bewildered about this, and neither it nor the Liberal Party knows what to say. Do they or do they not consider that the total borrowing requirement, the total overall deficit of the Budget, is big enough? If they want us to go further, let them say so. None has had the courage to say so clearly. Unless they are prepared to say so, all their arguments sound rather hollow.

Mr. Mitchison: I have checked with my hon. Friends, and my recollection and theirs is that we have all suggested that we think that this Budget is inadequate and insufficient. If that is not criticism, what is?

Mr. Mandling: With respect, they have all said it, but they have not said what they meant. It is easy to say it, but what do they mean? If they think that it is inadequate, do they think that the overall deficit should be larger? Should I have made bigger tax concessions and have had a bigger deficit? If so, will they kindly say by how much? They are not prepared to do so, because they know very well that the Budget is a very large move indeed towards expanding the economy, and is a measure of expansion based upon our faith in the ability of our economy to sustain stable prices. If they want to go further, let them be a little more specific.
The hon. and learned Member said that the personal allowances were spread very thinly. For years we have been told that we have not been spreading them thinly enough. Now, apparently, they are too thin. Hon. Members cannot expect that criticism to be taken seriously.
The hon. and learned Member and the hon. Member for Huddersfield, West (Mr. Wade) raised the point about National Insurance contributions. We have been


told that the taxation reduction is counterbalanced by the increase in National Insurance contributions. But all the National Insurance contributions will bring better benefits. This is a balanced scheme, and the effect of it is to take more money out of the Exchequer, net, than was taken out before. It is rather absurd to contrast a reduction of taxation with increases in contributions to a scheme, for which contributions additional benefits will in due course accrue.
The hon. and learned Gentleman said that there is a good deal to be said for the alternative—for reducing Purchase Tax and indirect taxation. If there is a good deal to be said for it, why has the party opposite not said so? If hon. Members opposite do not want Income Tax to be reduced, but something else, let them say so. With great respect, the hon. Member for Sowerby was very right about this—he did not try to play it twice over. If hon. Members opposite want us to spend the money in another way they should say so, but they cannot do it twice. They cannot have reductions in both direct and indirect taxation— —

Mr. J. T. Price: What about the regulator?

Mr. Maudling: What about the regulator?

Mr. Price: The Chancellor has powers that can be a very valuable election weapon nearer to the time when it suits the right hon. Gentleman's convenience, so he is not quite so naive as he tries to persuade us.

Mr. Maudling: Nor are my powers of prophecy as great. If the hon. Gentleman does not like my having these powers, no doubt he will, in due course, vote against my having them.
The hon. and learned Member for Kettering said that Schedule A was rather difficult, but at the beginning of the debate his hon. Friend the Member for Sowerby said that the party opposite agreed with these proposals. I think that it has now become more difficult—he must have been listening to his hon. Friend the Member for Manchester, Cheetham (Mr. H. Lever) —

Mr. Mitchison: What I said was that the philosophy of it was rather difficult. The results are clear enough, and I read

them out, and the right hon Gentleman heard them. Does he really think that they are fair as between owner-occupier and tenant?

Mr. MauMing: If they are not fair, will the hon. and learned Gentleman vote against them? I do not think so—

Mr. Diamond: Will the Chancellor explain why he voted against this time after time?

Mr. Maudling: As we all know, under Conservative Governments tax improvements come progressively year by year.
I think that the capital allowances have been accepted on both sides as being of importance. We must not underestimate them, because it is important for British industry now to realise that the capital allowances now available for investment in new plant compare, I think, favourably with those in any country of 'the Western world. It has been suggested that we could go further, but I do not think that we could. I think that they are big enough; and that both sides will agree that the investment allowance, the initial allowance and the simplification and acceleration of general capital allowances are right in the circumstances.
Finally, the hon. and learned Gentleman seemed to be against the reduction in Stamp Duty. Once again, if he is against it, he will no doubt do the appropriate thing—although I doubt it.
I have already referred to several of the points made by the hon. Member for Sowerby. He said that he wished to debate Purchase Tax in its proper place in the balance of direct and indirect taxation. With respect, I think that he has a very important point there. If I had not made these reductions in direct taxation, the ratio of direct to indirect would have risen to a higher point than it has been for many years. In this country we have a tendency to put too much weight on direct taxation, and I deliberately wanted to put it in the other direction. But that matter, like many other things, can he discussed in Committee.
My right hon. Friend the Member for Flint, Wes: (Mr. Birch) dealt with the broader issues. I would agree with him wholeheartedly when he said that
the £ is not overvalued. It is most fundamental to


make that clear. Steadily, our competitive position has been improving. Several references have been made to the efforts made by my predecessor, and there is no doubt, when we look at the company reports now coming out, that in the last part of 1962 and the early months of 1963 the effect of those efforts has been to make British industry far more conscious of costs and far more competitive. The thing that underlies the strength of the £is the comparative competitive ability of British industry. I very much agree with my right hon. Friend that the £is far from being overvalued.
I also agree with him in stressing that the two pre-conditions of the 4 per cent. growth rate that we have accepted in the N.E.D.C. are, first, an incomes policy—with which, as he rightly says, considerable progress is quietly being made—and, secondly, the expansion of our export trade. The two, of course, entirely hang together.
The hon. Member for Ladywood spoke mainly on Purchase Tax, including the question of chocolate biscuits. That is a difficult point, and I expect that we shall hear more about it in Committee. The hon. Member for Huddersfield, West was not sure whether the Bill would extend purchasing power now. He asked himself a question, though I do not think that he got an answer. Again, if what is being done is not enough, what more would he do?
The hon. Member said that the reliefs should be more spread, but I wonder whether that is so. Those on the Front Bench opposite said that the reliefs were spread too far. We cannot do both things, and if we want to spread Income Tax reliefs over a wide range of people they must necessarily be spread thinly. In fact, I do not think that they could be spread much more thinly. Certainly, I would not agree with the hon. Gentleman, who would deny to Surtax payers the benefits of the increased personal allowances. One of the improvements in the tax structure has been the carrying through of increased personal allowances, or a good proportion of them, for Surtax purposes.
The hon. Gentleman, and other hon. Gentlemen, spoke of the scope of the new free depreciation provisions in the

development districts. There are two rather different points here. First, the general policy of development districts or areas has bean argued often, and will no doubt be argued again, but it is really rather more relevant to a debate on the Local Employment Act than on the Finance Bill.
The second point is how to define the areas which qualify for what we call free depreciation. We must define these areas very closely. I have no doubt that this subject will be discussed during the Committee stage of the Bill. It is a very important and difficult point, but certainly is very important for tax purposes. If the Board of Trade is making a grant to a factory outside a development district, it can say that as half the people who work in the factory will come from the development district it will allow a proportionate amount of the allowance that would have been received had the factory been in the district. But that sort of system is not possible for tax purposes. We cannot have proportionate allowances. Therefore, the line must be drawn clearly for the purposes of taxation.
The other argument advanced, and an important one to meet, is that by giving this very big inducement, which it is, to industry, we are creating a much sharper differentiation between firms inside the areas and firms outside. This is quite inevitable. If we want to increase the help given to certain areas, the more we increase that help the more we increase the differentiation.
I said in my Budget statement that I hoped the House would support me on this. If we are to make the benefit much more noticeable we shall have much more acute differentiation. We must hold firm to the line of demarcation, otherwise the whole thing will crumble away. I shall listen with great care to what is said in Committee on these matters, but we must stick to the principle that if we want to help people who need help we must concentrate, establish the priorities, and define the areas in which the priorities appear.
This is relevant to what my hon. Friend the Member for Blackpool, North (Mr. Miscampbell) said. He has a special problem of seasonal unemployment. This, again, is probably more appropriate to trade considerations than to the Local


Employment Act. It is extraordinarily difficult to deal with places where there is high unemployment in winter and a scarcity of labour in summer. These places have a special problem which can be dealt with only by special methods.
The hon. Member for Stoke-on-Trent, South (Mr. Ellis Smith) referred to a number of matters. I did not quite follow his point about the millions of pounds taken out of soccer by millionaires. Perhaps the hon. Member can explain it to me later.

Mr. Ellis Smith: The right hon. Gentleman should ask the Liverpool people.

Mr. Maudling: Perhaps we can discuss this later.
The hon. Member asked why Stoke-on-Trent should be paying tax whereas people from Merseyside or in the North-East are not. We must stick to the criterion of the percentage of unemployed in a given area. It is true that if one takes a big area one gets in absolute terms a larger total of unemployment, but the only criterion we can go on in deciding what areas to help at the expense of the generality of taxpayers is the percentage of unemployed in a given area. Merseyside, the North-East, Scotland, and Northern Ireland, the existing development districts, survive that test well.
My hon. Friend the Member for Belfast, East (Mr. McMaster) raised a number of points on Clause 29. We will certainly consider what he said. There is a difficult point to be resolved here. On capital allowances for non-industrial buildings, I doubt whether there is a convincing case. It is an expensive matter and there are considerations in the case of commercial buildings which are not quite the same as those that arise in the case of buildings designed for productive industry.
I was a little disappointed that my hon. Friend should say that he preferred a tax holiday to the free depreciation. I think that they are rather the same. If we say to a man that he need not pay tax until he has written off 130 per cent. of his investment in plant and machinery, that is getting rather close to a tax holiday. No doubt, whatever we do my hon. Friends in Northern Ireland will press us to do more, and rightly, because that is their job, but I think that we have done a large amount already.
The hon. Member for Cheetham made his usual interesting speech. I do not know whether I or the Front Bench opposite disagreed more with what he said, but I was interested to find that he supported entirely my right hon. Friend the Member for Flint, West on the position of sterling. This is healthy and very desirable. The fact is that it is quite possible for this country's economy to expand at the sort of rate at which we aim without inflation and without any weakening of our currency. The people who write in publications and assume that expansion is necessarily accompanied by a weakening in our currency do no service to the cause which is equally supported on both sides of the House. I must apologise to my bon. Friend the Member for Walthamstow, East (Mr. J. Harvey) for not having been present during his remarks, which I shall study.
I think hat generally I have covered most of the points which have been raised. Gambling, and the desirability of taxing it, were referred to by the hon. Member for Norfolk, South-West (Mr. Hilton). I must make it clear that the fact that I have not taxed gambling this year does net mean that I have given up the hunt. What I want to be sure of is that before we introduce a tax on gambling we know what we are doing. I welcome the assistance of experts on both sides of the House in this matter.
The fact is that it is very difficult to define in law what is gaming and what is not gaming. Some of the things which we occasionally do at weekend fêtes when we indulge in some innocent occupation may, if taken to a court of law, prove to be gaming of a heinous character. The difficulties are considerable. I have felt throughout the consideration of the taxing of betting in particular that any measures taken by the Government which would undo the work of recent legislation on gaming generally, and anything which drove betting back on to the streets and re-created any of the evils associated with illegal betting, would be very bad.
Therefore, I hope that the House will support me in this decision. I think I have been right in moving slowly, because it is right to have general taxation in the whole field of gambling on a fair basis, and it should be done in an effective manner and not in a manner which


would re-create social evils which we have abolished.

Mr. Ellis Smith: The Chancellor has replied in a reasonable manner to most of the points that have been raised in the debate, but he will remember that the Financial Secretary said that future legislation would be based on a comprehensive survey or inquiry. I should like to know whether the Chancellor will agree to representations being made by organised bodies involved.

Mr. Maudling: Yes. I want to get the maximum information. What we do not know enough about is the extent of gaming in this country. A difficulty in getting information about gaming is that the game of chemin-de-fer is distinguishable to most of us in practice from the games that we play at a fete or a bazaar, but in law it is very difficult to make that distinction.

Mr. J. T. Price: I fully accept the sincerity of the Chancellor's views on gaming, but I do not think that he imagines that what he says is accepted by everybody in the House. Whilst undoubtedly the Betting and Gaming Act, on the Standing Committee of which I served, has checked certain evils, it has created many other greater evils. It has created thousands of gambling dens, sordid institutions which ought to be condemned by this House. We have gone from bad to worse since that legislation was enacted. I hope that the Chancellor will take some action to curb some of these evils, which are becoming a social scandal.

Mr. Maudling: I doubt whether any Chancellor should make moral judgments. Seriously, though, my purpose is to amass as much information as possible about the nature of gambling and betting in this country—I recognise the present situation is not satisfactory—so that I can introduce a form of taxation which is fair to all concerned over as wide a field as possible.
I think that I have covered many of the points raised in the debate—

Mr. Hilton: Would the right hon. Gentleman comment on my question, namely, whether he has considered reducing the Purchase Tax on bicycles?

Mr. Maudling: I am sure that in the course of our later discussions we shall be considering bicycles, soft drinks and one or two other items connected with Purchase Tax.
The hon. Member for West Lothian (Mr. Dalyell) referred to the price of books and the price of a bag of sweets in Communist countries. He implied that they have brought the price of books down to the price of sweets. I thought that they had put the price of sweets up to the price of books. However, these are points which will, no doubt, arise in Committee.

Mr. Dalyell: It is the general principle of a tax on learning and on laboratories and audio visual aids—they are taxed.

Mr. Maudling: I think that the effect of Government incoming and outgoing on education in this country is that the total net expenditure from public funds on education has been rising faster than expenditure on any other single item of Government expenditure, Which I think right, and something that should be continued.

Mr. V. Yates: rose—

Mr. Maudling: I have been speaking for rather a long time, and have given way several times—

Mr. V. Yates: When I raised the question of Purchase Tax I do not think that the right hon. Gentleman was in the Chamber. He has dismissed those questions as though we shall hear about them in Committee. I think that the point raised by my hon. Friend the Member for Birkenhead has shown quite clearly that a factory in Birkenhead has reduced employment by 17 per cent. due to the imposition of Purchase Tax on its products. Is not this a matter about which the Chancellor should say whether something is to be done and not wait for us to raise the matter again?

Mr. Maudling: I have seen a lot of questions about whether chocolate biscuits are confections or biscuits. I think that is the sort of point which it is more


appropriate to consider during the Committee stage of the Bill than during this Second Reading debate.
I think that I have covered a very wide range of individual points and that it is fair to say—I do not think that it could be seriously disputed—that this Finance Bill, putting into effect the proposals in this year's Budget, has been

generally accepted in the House and in the country for what it was intended to be—an attempt to stimulate the economy on principles of equity.

Question put and agreed to.

Bill accordingly read a Second time, and committed to a Committee of the whole House.

Committee Tomorrow.

Orders of the Day — FORT WILLIAM PULP AND PAPER MILLS BILL

Order for consideration, not amended (in the Standing Committee), read.

Bill recommitted to a Committee of the whole House in respect of the Amendments to Clause 1, page 1, lines 11 and 16, standing on the Notice Paper in the name of Mr. Bruce Milian.—[Mr. Millan.]

Bill immediately considered in Committee.

[Sir ROBERT GRIMSTON in the Chair]

Clause 1.—(POWER OF BOARD TO MAKE ADVANCES, AND GRANTS IN RESPECT OF INTEREST ON ADVANCES.)

10.28 p.m.

Mr. Bruce Millan: I beg to move, in page 1, line 11, to leave out from "above" to "shall" in line 12.

The Deputy-Chairman: I think that it would be convenient to discuss this Amendment together with the second Amendment, in page 1, line 16, at end insert:
(3) Interest on sums advanced under subsection (1) above and accruing before 1st January 1967 shall be charged at a rate of 51 per cent. per annum. Such interest accruing after the aforementioned date shall be charged at such rates, varying according to the net profits of the Company arising from the operation of the pulp and paper mills in respect of which the advances have been made, as may be agreed upon between the Board and the Company.

Mr. Millan: The Bill provides in Clause 1 that the sums to be advanced by the Government to Wiggins, Teape and Company Limited for the purpose of constructing the pulp and paper mill shall be advanced at an interest rate of 5½ per cent. per annum. That is a fixed rate of interest. The purpose of the Amendments is to delete the fixed rate and to substitute a rate of interest which would vary according to the net profits of the company in the operation of the mill. I think the purpose of the Amendments is fairly clear, even though, technically speaking, there may be certain defects in the drafting.
If this Amendment were accepted, it would be fair to say that the new pulp

and paper mill at Fort William would, in the fullest sense of the term, be a joint undertaking of private and public enterprise. It is important to point out that the Amendment does not seek to import into the Bill anything very startling in the way of principle because this is, in any case, a joint public and private enterprise.
10.30 p.m.
Quite apart from the pulp and paper mills themselves, the vast majority of the timber coming to these mills will come from the Forestry Commission. The local authorities will be concerned along with the Commission in the construction of roads, and the local authorities will be concerned with the construction of other services, water, local authority housing, and the like. Fortunately, we shall also have British Railways involved in the provision of transport facilities. If, as was pointed out on Second Reading, this project had been delayed just a little longer the chances would have been that the railways would not have been there at all. In the direct financing of the mills themselves the Government are a major participant, because it is provided in the Bill that the Government may provide finance to the extent of some £10 million out of the total sum involved in the construction. The Parliamentary Secretary to the Board of Trade quoted that in his Second Reading speech as £19 million. So that the Government are participating in financial terms on something like a 50 per cent. basis.
The Government are not, however, participating in the equity of this enterprise. As the Bills stands, and if the Amendment is not accepted, the Government are simply providing the loan capital. I know that the Government have a prejudice against public enterprise, a prejudice which is not sustained in the face of economic reality. I think it is recognised even by the Government that in the Highlands, to take only one example, nothing very fruitful will come without a large measure of public participation.
One interesting question about this enterprise, a question which was raised on Second Reading, but which was not satisfactorily answered, is whether the Government prejudice against public enterprise would have been maintained if the circumstances had arisen that no


private firm in Britain had been willing to proceed with the project. After all, only one firm, Wiggins, Teape—and a great deal of credit is due to it, and I say it now without qualification—was willing to proceed with this project but there was doubt up to the last minute whether the project would proceed at all, because discussion about this started no less than ten years ago. If Wiggins, Teape had called off, would the Government have abandoned the project altogether? From their past performance and past prejudices one would assume that they would, and yet without Government participation of one sort or another, either to the extent of 50 per cent., or perhaps, as it might have been in other circumstances, to the extent of more than that, this project would not have come to the Highlands at all.
One would have hoped that the Government would explicitly have recognised what is implicit in so much of their actions in the Highlands, that without a large measure of public enterprise we shall never be able to solve the problems of the Highlands. Anyone who reads the Highland Panel's Report on the visit to Norway in September, 1961, will be impressed by the lesson he can draw from that, that without public participation areas like the Highlands can have very little future ahead of them. In Norway, not only the Government of Norway participate in the equity of undertakings of private enterprise, but even local authorities are enabled to do that. When my hon. Friend the Member for Fife, West (Mr. W. Hamilton) tried to introduce a similar provision for local authorities in Scotland, he was opposed by hon. Members opposite.
In the face of facts the Government maintain their prejudice against public enterprise in developments of this kind. I should like to have seen this project setting an example for the fullest kind of joint public and private enterprise in the Highlands. I ask the Parliamentary Secretary whether the Government ever asked Wiggins, Teape & Co. if it would be willing to proceed on that kind of basis or whether all the discussions took place on the kind of potential agreement now described in the Bill. Did the Government ever make the kind of proposal in this Amendment—that they should participate fully in the enterprise

as far as the provision of equity capital was concerned?
According to the hon. Member's speech on Second Reading, the Board of Trade investigated the economics of the project very thoroughly and satisfied itself that it was potentially a profit maker before it agreed to the scheme going ahead. He told us that it was expected that the company would repay the Government's share of the finance over a period of only ten years, starting from 1968. This seems to indicate that the potent al profits will be quite substantial.
I appreciate that if the Government were to shale in the equity of the undertaking, if Mere were to be a rate of interest which was to vary with the net profits of the company, that might well mean that the rate of interest, if things did not go as profitably as expected, could be leis than the 5½ per cent. laid down by tie Bill. The Government should have; been willing to take this kind of risk. I appreciate that if the Government were to take the chance of sharing in the profits they should also have to be willing to hear their share of any losses incurred. Therefore, this Amendment would imply, in certain circumstances, a lower rate of interest as well as a higher.
There is also the question of control. It is difficult to know exactly what this Agreement is to be. The Bill tells us practically nothing. It is only when we get the copy of the Agreement, when it will be virtually too late for us to do anything, that we shall be able to see exactly what the arrangements between the Government and the company are.
The implication of an Amendment like this would be that the Government would have a greater share in the control of the enterprise, in policy generally as well as financial participation. That is very desirable. There was a very ursatisfactory situation some months ago in connection with another Government 'financed enterprise, the Greenock dry dock. The dredging contract which some of us thought strongly ought to go to a Scottish firm was placed with a London firm. The unsatisfactory feature of that was that although the Government were providing two thirds of the money they had no share in decisions of that sort.
One hopes that this kind of situation will not arise in the case of Wiggins, Teape. I do not want to appear to be in any way churlish about the company's participation in this tremendous venture, because on this side of the House we welcome it unreservedly. But when Government money to the extent of £10 million is put up there is a principle involved. It is the principle that the Government should have some control over the policy of the enterprise with regard to the placing of contracts and perhaps with regard to employment policy. It is extremely unsatisfactory that, as far as one can see, they are not going to have it.
When tackled about it on Second Reading, the Parliamentary Secretary offered the very feeble excuse that he did not think that the fact that the Government were supplying £l0 million was any ground for seeking to play a permanent part in the company's affairs which covered a very much wider field than the Fort William mill. This could have easily have been a separate enterprise, a separate company financed jointly by Wiggins, Teape & Co. and by the Government. I have no information about it, but I imagine that the company may be setting up a special subsidiary to run the enterprise. The hon. Gentleman's excuse was a very feeble one, and it seems to me that there is a very strong case for direct Government participation in the equity of the undertaking. I hope that the Government will, even now, look very carefully at the Amendment.

Mr. Archie Manuel: I say at once, as I did on Second Reading, that we are delighted that this project is to come, but I feel that we should have the utmost freedom to speak with great candour on the sort of set-up which we think should be established. I am myself convinced that it will be less of a venture than a great success. I do not think that there is a great risk. The sort of money involved here will not, I believe, allow otherwise, and I am quite sure that the business interests behind Wiggins, Teape & Co., Ltd. have made certain that it will be a successful venture. Nevertheless, we as a Committee must recognise that there is a quite large expenditure of public money involved, and not only expenditure by the Government. We are here concerned not only with taxpayers

as such but with ratepayers, too, and we must consider carefully how the public interest generally can be safeguarded.
The local authorities, the Inverness County Council and the Burgh of Fort Williams, will have quite heavy expenditure to meet in the provision of the necessary roads.
Do the Government intend to make special arrangements about that? Furthermore, in the provision of housing and other essential social services such as water supply, sewerage, electricity and so forth, large sums will have to be spent by local authorities which have not great rate-yielding opportunities.
There is no new principle in what we suggest. I have in mind the Highlands and Islands shipping services. I am pleased to see present the former Secretary of State for Scotland, the right hon. Gentleman for Renfrew, West (Mr. Maclay) and my near neighbour in Renfrew, because he spoke at great length in the debate at the time when he nationalised those ships. We were discussing the Undertaking between the then Secretary of State and David MacBrayne Ltd., a draft of which had been laid before the House on 27th November, 1961.
10.45 p.m.
I am not saying that the case which I am instancing is on all-fours with the Fort William project, but it is on this matter of rate of interest. The former Secretary of State for Scotland said on that occasion:
I have said that the grant has to allow for interest on the capital which the company employs in its business. We have considered carefully what the appropriate rate of interest should be, and have come to the conclusion that the company's capital should be remunerated at the same rate as if it were made available to the Government as a ten-year loan. The rate, which is provided in Clause 17 (1), is accordingly 61⅝per cent. which was the appropriate rate prevailing at the date on which the agreement was provisionally concluded with the company. This is the rate that the Government would have had to pay if they had had to borrow the capital needed to run the services themselves for ten years.
There will be a change in the fifth year. There is to be a general financial review, as explained in Clause 20 but special provision, outwith the general review, is also made in Clause 17 (2) for the interest rate. For the second five years, the company has agreed that it should follow the appropriate Government borrowing rate prevailing on 1st January 1967, as determined by the Treasury.
Perhaps the right hon. Gentleman has forgotten what he said in 1961.
His view was endorsed by the Under-Secretary, who is now assiduously studying his notes and who said:
The rates of interest under Clause 14 will depend upon when the money is finally made available to the company, and the rate of interest then pertaining, but I think that the hon. Gentleman will appreciate that this does not really matter very greatly as this is really only a cross entry, and if a high rate of interest is paid then my rigfht hon. Friend will just have to make the subsidy that much bigger."—LOFFICtAL REPORT, 11th December, 1961; Vol. 651, c. 102–164.]
All I am doing in quoting that is showing that there are substantial grounds for the same Government as then agreeing that the same rate of interest should not run over the whole period. That door, at any rate, is open and whether the interest rate can be manipulated in the way suggested by my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) is a matter for serious consideration.

Mr. Cyril Bence: This is a unique Measure and my hon. Friend the Member for Glasgow, Craigton (Mr. Millan) is more justified in bringing forward this proposal for State participation in this enterprise than has been the case with any State-aided enterprise since Disraeli acquired shares in the Suez Canal. The pulp works at Fort William will use raw material developed by the State over the last thirty or forty years by the provision of forests in the Highlands. In the forests of the Highlands there is to situated an enterprise called Wiggins, Teape and Co. Ltd., or more probably Wiggins, Teape and Company (Scotland) Ltd., just as we have had B.M.C. (Scotland) Ltd. and Rootes (Scotland) Ltd. —

Mr. Manuel: MacWiggins.

Mr. Douglas Jay: Scottish Pulp (Development) Company.

Mr. Bence: The Scottish company will be responsible. The money will be loaned to Wiggins, Teape & Co. Ltd. and, as the holding company, it will be responsible and liable. I take it that, as the holding company, it will be liable, for example, for any debts. I take it that, equally, it will be responsible for the gathering of profits.
As I see it, this £10 million will be in the form of a debenture. The

Amendment, on the other hand, asks that it should be, a participating share in the Scottish company, I heartily support that request. I do so because the company will be the one customer for the type of timber that goes into its pulp mill. There will have to be price fixing. I presume that the mill will pay the world price, but will it? Since it will be the only customer, we are entitled to know if the world timber price will be paid.
The mill may, to begin with, import timber from Canada, Norway or elsewhere to supplement perhaps a short-fall from the Scottish forests. But I imagine that it is the; view of the Board of Trade that there will be ample timber in the Highlands to keep the mill running, perhaps three shifts a day. Will there be sufficient raw material? We must remember that we have the position of a monopoly consumer of a Scottish product. Despite being in this monopoly position, it will be able to import timber —quite freely, apparently—from abroad.

Mr. Deputy-Chairman: I am sorry to interrupt the hon Member. I appreciate that he is advancing 'arguments concerning participation, but he is getting wide of the subject of the Bill.

Mr. Bence: I have been making this point because I believe that, because of the freedom the mill will have in acquiring its raw material, the Government should have a certain amount of right to participate in the management of what will be a subsidiary company of Wiggins, Teape & Co. Ltd. I understand that a Scottish company will be set up. The Government are providing £10 million as a debenture and the Amendment merely asks that the Government should participate in the profits of the company.
I believe that the potential for making profits is terrific. The paper industry is today one of the most profitable. The Canadian and Swedish companies are doing extremely well and I have no doubt that the new Scottish firm will do equally well. I see no reason, therefore, why the Amendment should not be accepted. The Government are already pledged to make a payment of not exceeding £1.3 million to offset the interest charges of 5½ per cent. against the loan. Surely the Board of Trade should accept that in a case like this—probably


the most clear cut case of its type—the State should participate in the shares and in the running of what will be an enterprise paid for out of the taxpayers' money; public money joined up with the know-how and technique of Wiggins, Teape & Co. Ltd. No banking company or insurance corporation in Britain would make an advance of £10 million to any group of scientists or technologists without having a nominee on the board. I am sure that a banking institution or an insurance corporation would insist on having the right to take up participating shares. I hope that the Government will accept these reasonable Amendments.

The Parliamentary Secretary to the Board of Trade (Mr. David Price): The speeches which we have heard, particularly that by the hon. Member for Dunbartonshire, East (Mr. Bence), tempt me to make a Second Reading speech, but I should be out of order if I did that.
The Amendments relate to Clause 1 (2). If they were accepted their effect would be two-fold—first, to make the Board of Trade responsible for negotiating the rate of interest to be paid on the loan after the initial period, during which it is likely to be interest-free—before 1st January, 1967. Secondly, they would make the Board of Trade responsible for relating that rate of interest to the profits deriving from the mills.
As the Committee can see, and as the hon. Member for Glasgow, Craigton (Mr. Millan) fairly pointed out, the Amendments are contrary to the arrangements in the Bill as drafted. I remind the House what they are. Subsection (2) fixes the rate of interest on the loan at 5½per cent. a year and enables the Board of Trade to agree the other terms of the loan with the company. A rate of 5½per cent. is broadly in line with the current Government rate —for example, Treasury borrowing on a ten-year basis—and as such was regarded as acceptable to the Government and to the company. Furthermore, by arrangements to be made under the Bill the company will start repaying the loan at the end of 1968 at the 5½per cent. interest rate. As I told the House on Second Reading, repayment will be made over ten years, in ten

equated instalments of capital and interest starting on 31st December, 1968. If we adopted the Amendments there would be no certainty as to the return which the nation would get from its loan to the company. The hon. Member fairly conceded that that would be one of the consequences.
This proposal would have the added disadvantage if we adhered to the current period of repayment—ten years —that any financial benefits which might accrue to the taxpayer would be limited to the period of the repayment of the loan, which is likely to be the period of the least profitability of the enterprise, because it includes the earlier years when it is getting into full production and is having teething troubles. Inevitably one expects far lower rates of return on the investment in the earlier years than when the concern is fully established.

Mr. Milan: But if it were a varying rate of interest there would not be the ten-year repayment period from 1968. It was impossible to put down an Amendment to that effect because that is in an agreement which is not before us.

Mr. Price: I think that the hon. Member is agreeing with me on this point. He said that these Amendments are a method of acquiring an equity interest in the project by the back door. I do not object to that. It is probably the only way in which he could achieve it under the rules of order.
On Second Reading both my right hon. Friend the Secretary of State for Scotland and I indicated why the Government decided not to take an equity interest in the project but preferred to lend the money as a prior charge on the company's profits. As this is the issue before us, I should like to give one or two of these reasons.
The Fort William project is only one of the Wiggins, Teape group's many activities, and the Government would hardly be justified in participating in the equity of the whole group. Hon. Members I think accepted this. In considering what sort of subsidiary company Wiggins, Teape propose to run, it may be of interest to the Committee to learn that the Scottish Pulp (Development) Company, which was established to investigate this project, will be wound


up. It was originally formed jointly with the other companies which at the time were to participate in it. The project will be operated jointly by two firms which are within the Wiggins, Teape group of companies. The reason is that there are two specialities coming in—the pulp side and the paper mill side —but it will just be part of the Wiggins. Teape group as a whole—

11.0 p.m.

Mr. Manuel: The hon. Gentleman should make it quite clear that when he talks of the Wiggins, Teape group of companies, the Government are devoting £10 million for a period of years to the Fort William project alone, within that group. If there is separate accounting there, he cannot have it both ways.

Mr. Price: The hon. Gentleman is perfectly right in saying that the money is for the Fort William project as such, but the company with which the agreement will be made is the Wiggins, Teape group as a whole. Furthermore, if, in the early years of the project, the Fort William project is not making a profit —after the early years when we come to waive the interest by a further interest-free loan—from 1967 onwards we will have a call on the profits of the group as a whole to repay the interest and capital. It is a considerable advantage to the taxpayer that the prior charge is on the profits of the group as a whole, and not just on this project—

Mr. H. Rhodes: The Minister is himself showing the strength of my hon. Friend's argument. If this project is part of the Wiggins, Teape organisation, what is to stop Wiggins, Teape from going on for many years without showing a profit at all? In that case, what happens to the Government's loan, except coming on to the whole of the group. If this, in addition, is a development district and the company is getting 25 per cent. for buildings and 10 per cent. for capital outlay on the machinery, and is able to write off at 130 per cent., as the Chancellor told us this evening, surely there should be a Government nominee on the board to look after the Governments interests?

Mr. Price: The taxpayer's position is very much more preserved by the fact

that the security is not merely on the project itself but on the profitability of the whole Wiggins, Teape group, which is, as it wore, standing to guarantee repayment. Speaking in commercial terms, this is in the nature of a debenture, as a prior charge.
I know teat hon. Members are under the disadvantage that the agreement is not before the Committee, but the agreement cannot be before the Committee because we cannot conclude the agreement until the Bill has had the Royal Assent—

Mr. Jay: Can the Parliament Secretary elucidate one point? Will the Wiggins, Teape group be able, in relation to this project, to claim the free depreciation under the Finance Bill, and the other benefits under the Local Employment Bill, in addition to this agreement?

Mr. Price: I understand so— —

Mr. Manuel: The Parliamentary Secretary has explained that if the Fort William project did not prove to be successful there would be the ability of the rest of the companies in the group to guarantee repayment. But if the reverse were to happen—if there were a failure in the other Wiggins, Teape projects and the Fort William one were successful—the weight of the others would pull it down. That could happen.

Mr. Price: If I might correct my reply to the right hon. Gentleman's intervention, I understand that Wiggins, Teape would have the free depreciation, but not the building grant.
We were dealing with the broad point of the possibility of getting an equity in the project. The firm has asked only for relatively short-term financial assistance. One hon. Member opposite admitted that, in the light of this sort of project, the ten-year repayment period could be regarded as short term.
We feel that the taxpayer's interest is most suitably safeguarded by taking a prior charge on the Fort William assets. The hon. Member for Central Ayrshire (Mr. Manuel) asked what would happen if the other' part of Wiggins, Teape got into the near red. He asked what guarantee the taxpayer had. The taxpayer's guarantee will be the whole of the assets at Fort William. I understand the difficulty hon. Members are in because the agreement is not before the Committee.


They will equally understand that we can- not enter into agreement before the Bill receives the Royal Assent.

Mr. Bence: The hon. Gentleman has just said that the debenture will be a prior charge on the Fort William assets. I understood him to say earlier that the debenture will be a prior charge on all the assets of the parent company.

Mr. Price: It is fairly clear. The whole of the Wiggins, Teape trading profits are available to pay back loan at the interest rate of 5½ per cent., but if the worst really happened and Wiggins, Teape were as a group to run into great financial difficulty the prior charge which the public would have on Wiggins. Teape, if the whole thing were wound up, would be a prior charge on the assets of the Fort William project.

Mr. William Ross: It is a great pity that the hon. Gentleman did not consult the former Secretary of State for Scotland, the right hon. Member for Renfrew, West (Mr. Maclay). He would have found that when we dealt with the Highlands and Islands Shipping Act and the North Islands of Orkney Act we had before us at the same time drafts of the agreements referred to therein.

Mr. Price: There is the further fact that in the short term, at least, there are commercial risks involved in establishing this project. Therefore we feel that it is right that the company and not the taxpayer should be asked to bear these risks and that in asking the House to approve the use of public funds to assist this project we should be able to make it quite clear what return we should be receiving.
While a rate of interest varying with the profitability of the enterprise might result in increased payments to the Revenue if everything went as we hoped, in the event of the venture not proving successful in this limited period it could involve a considerable loss to the Exchequer, and this might be more likely to happen in the earlier years.
Apart from the issue of principle, to relate the rate of interest to the net profits of the company, that is Wiggins, Teape, the holding company, arising from the operation of the pulp and paper

mills, would lead to practical difficulties. Our intention is that the Fort William project should be operated jointly by two of the subsidiaries of the company and will represent only a part of their activities. The net profits of the parent company as a result of the project will depend entirely on the policies adopted by the group both for charging intercompany transactions, that is purchase of raw materials and sales of finished products, and also for payments of dividends or other transfer of profits between the subsidiaries and the parent.
Any provision with regard to relating interest to profits would have to be included in the original agreement between the Board and the company and the whole project might be defeated by the difficulty of obtaining agreement between the parties. It would cause an impossible situation if agreements regarding the rate of interest had to be negotiated from year to year when profits, if any, were ascertained, because this might also lead to an impasse and the whole project might get into administrative difficulties with wrangling going on with the Board of Trade.
It is only fair from the point of view of somebody trying to manage an industrial project that if there is a prior charge on the trading profits one should know the rate of interest one has to service. I think that this is reasonable and there for hon. Members will not be surprised to know that I cannot ask the Committee to accept the Amendment.

Mr. Jay: We all wish to see this joint venture go forward and succeed quickly. Indeed, it is a joint venture in which the State is putting up more than half the capital, and, allowing for the other concessions, such as the free depreciation, I should think that when it is worked out it is more than half the capital. But we are not by any means satisfied with the form in which the Government are presenting this venture to us. The hon. Gentleman cannot expect us to be bound by this ten-year repayment agreement. This is not in the Bill. We must argue tonight on the basis of what is in the Bill, and we must propose Amendments on that basis. It is unsatisfactory that we have quoted at us an agreement which we have not seen and which will not be laid before the House until some time in the future.
Under the proposals which the Government are now putting before us the situation is this. If the venture is not sufficiently successful for the interest to be fully paid by the company in the early years, what happens is that in the early years the Wiggins, Teape group gets this large amount of capital interest-free, and in the later years when it pays interest the interest cannot rise above 5½ per cent. The loan is then repaid over a period.
In effect, therefore, the State is taking a very large measure of the risk and it cannot get in return more than a rate of 5½ per cent. for some of the period of the loan. That does not seem a very satisfactory situation. In addition, it is taking the risk without getting any control. There is no representation on the board. There is no shareholding. It cannot, therefore, exert pressure to see that the money is used in the most economical and profitable manner, which one would have thought anybody lending this large amount of money would wish to do.
But suppose that instead of that alternative the Government had adopted the sort of proposal which my hon. Friend has put forward. Suppose the Treasury had taken either a direct equity share in this venture or suppose there had been a joint subsidiary formed, of what part equity was held by Wiggins, Teape & Co. Ltd. and the other half was held by the Government. In those circumstances, if the venture had not turned out very successful there would have been very little or no profits either for the Government or for Wiggins, Teape & Co. Ltd. If, on the other hand, it had, as we hope, proved highly successful, the company would have done well and the taxpayer might have earned more than 5½ per cent. I should have thought that would be a much more happy arrangement. This is how private enterprise would have arranged it.
To take two other examples from development districts, in the case of British Nylon Spinners at Pontypool, what did I.C.I. and Courtaulds do? They formed a joint subsidiary and took an equal risk and an equal share in the profits. The hon. Gentleman knows even more than I about I.C.T. and he will know these facts. At Grange-mouth, British Petroleum and British

Distillers formed British Petro-Chemicals and it has been highly successful. Indeed, the ironic fact is that the Government have a 52 per cent. interest in B.P., and B.P. has a major share in British Petro-Chemicals.

Mr. J. T. Price: Further than that, in the steps that have been taken to protect the taxpayer's interest they have accepted the appointment of Government nominees on the board of directors of that company, the same as Iranian Oil has a large equity shareholding.

Mr. Jay: And this is due not to the foresight of Disraeli but to the right hon. Member for Woodford (Sir W. Churchill). I do not see that the Parliamentary Secretary has advanced any reasons for preferring the system which he is putting forward in which the Government will have to pay a subsidy and will not get any control or share of the profits if the venture is particularly successful. It seems to me that the Government are rejecting what would be the sensible course to take, not only in the interests of the taxpayers, but as a business arrangement. They are acting out of purely political and ideological desires. The arrangements before the Committee mean that, so far as the private firm is concerned, it is a case of heads you win, tails I lose. We do not think that that is satisfactory.

11.15 p.m.

Mr. Rhodes: I should like to ask one or two questions. First, what guarantee have the Government after they have advanced the funds mentioned in the Bill? If the company does not make a profit, will the Government be recompensed in the long term? If this company which is being established at Fort William is a subsidiary of Wiggins, Teape there is surely nothing to stop Wiggins, Teape from "milking" the profits of the company and continually delaying the payment of interest on the capital which has been advanced. After hearing of the benefits which have accrued—134 per cent. being able to be written off from taxpayers' money, for example—and after the very flimsy way in which the guarantees are drawn, and in the absence of arrangements which we say should have been made, we cannot give a complete judgment on the matter.
All that we can do is to guess. It would seem that the company will be in a very advantageous position and, up to a point, I do not quarrel with that because we have to do something about the job in hand. Yet, on the other hand, there is surely no need for the Government to go beserk with the taxpayers' money to this extent. Without the Committee having reasonable knowledge so that hon. Members might try to form some estimate of how things will turn out, I would ask the Parliamentary Secretary to make a few comments on this question of guarantees; something a little more responsible and fuller than just saying that in the event of the company making a profit the responsibility for paying interest will rest on Wiggins, Teape as a whale but that, if it fails, the only recompense which the Government will have is on the assets of the venture at Fort William.
It seems that the Government have missed an important opportunity on grounds of dogma. This doctrinaire policy is wrong. The Government ought to have stepped out of the rut a little and gone in with Wiggins, Teape. Can the Parliamentary Secretary explain a little more fully some of these points?

Mr. Millan: I found the reply of the Parliamentary Secretary completely unsatisfactory. I must say that I thought it particularly ironic that he should have argued against the Amendment on grounds of complexity when the kind of agreement he has attempted to explain could not have been more complicated. This, of course, only demonstrates the unsatisfactory procedure we are following —the almost futile procedure—in discussing something which we have not got before us.
This Government do not often learn their lessons, but I hope that the Parliamentary Secretary might learn this lesson. It would be more satisfactory for the Committee to have this type of agreement before it should any similar occasion arise in the future.
The only point I want to press the Parliamentary Secretary to answer is this. I ask him the question specifically. Did the Government consider an alternative arrangement to the kind in my Amendment, or did they think only of simply advancing the money by way of loan?

Did they consider taking an equity participation? That is what I should like the Parliamentary Secretary specifically to answer.

Mr. J. T. Price: These points certainly deserve a fuller reply than they have received up to now. I rise to put a point of view I would normally hesitate to put here on Scottish business—

Mr. Ross: It is not Scottish business.

Mr. Price: —because I have been a Member long enough to know that we leave things north of the Border to our Scottish colleagues—

Mr. Manuel: This is not only a Scottish matter.

Mr. Price: —but this is a matter which transcends purely Scottish considerations to me, this is a fundamental matter of principle. [HON. MEMBERS: "Hear, hear."] It has been freely agreed in all parts of the Committee that the establishment of this new industry at the head of Loch Linnhe is a bold and imaginative venture which commands support on general lines from most of us who are anxious to see a revival of the affairs of the Highlands and better standards of living for the people who still live there.
Hon. and right hon. Gentleman opposite, as my hon. Friend the Member for Ashton-under-Lyne (Mr. Rhodes) said, are so preoccupied with ideological considerations—I am not saying we on this side are completely immune from them either—and pride themselves, and posture on public platforms, as being keen business men, and talk down to us bleary-eyed idealists— [Interruption.] Did I say "bleary-eyed"? I am not bleary-eyed even at this time of night. That was perhaps a Freudian slip I correct at once. I meant starry-eyed. Nevertheless, hon. Members opposite have talked often of the inability of us on this side to observe business considerations when we were the Government, and they say we would not observe them if we became the Government again, but the point is that no prudent director of a commercial undertaking would have entered into an agreement of this kind without better safeguards than the Government have so far shown they have.
I remind the Parliamentary Secretary of what may be ancient history but is germane to this issue. Some years ago,


in the period when Attlee's Government were in charge of the affairs of this country, we were very heavily criticised for the collapse of the groundnut scheme in Africa. My right hon. Friend asks, why bring that up? Because I was prepared to face the criticism of the groundnut scheme. It was a scheme which was initiated in the first place, if I am correctly informed, by the Lever combine, and when it got too big for it, it traded it off to the British Government—the Labour Government, who went into it with enthusiasm but without the technical skill and "know-how" to make it succeed. It failed. We heard in this Chamber about the groundnut scheme for ten years afterwards. We were prodded and chided about it. I am not complaining. We have got to be pretty thick skinned here to endure all the criticism—

Mr. Rhodes: I never heard the groundnut scheme mentioned after Suez.

Mr. J. C. Jennings: The hon. Member has now.

Mr Price: I was trying to keep my speech within reasonable limits.

The Deputy-Chairman: Order. The hon. Gentleman is entitled to use the groundnut scheme as an example briefly for comparison, but we cannot discuss its connection with Suez.

Mr. Price: I have no wish to transgress the rules of Order, Sir Robert. I illustrate my theme briefly by comparing the experience with the groundnut scheme with what might be the future experience of the Highlands development scheme under this Bill. We hope that it will succeed. I wish it the greatest success technical skill can provide. Nevertheless we are not sure that it will succeed. As far as I have been able to discover in reading the documents and in listening to the speeches on behalf of the Government, I see no guarantee that the taxpayer will be protected against the consequences if the scheme fails.
Unashamedly and without apology, I say that it is quite improper for a responsible Minister of the Crown to ask us to pass a Bill on the nod when the essential document which embodies the terms of contract is not before us. I ask you, Sir Robert, since this document has been mentioned by the Parliamentary Secretary, whether we are not entitled to have

it laid on the Table. I had always understood it to be the procedure that where a document was mentioned which was germane to a Bill we were entitled to see it. My right hon. and hon. Friends are entitled to press this point. I do not want to be unreasonable. My right hon. and hon. Friends have right on their side and until the Parliamentary Secretary can give an adequate explanation I do not think we should pass this Bill.

Mr. Manuel: The Parliamentary Secretary should be more forthcoming about the salient points of the agreement. I do not doubt that he knows the outlines of it. Something has been drafted but he is not telling us. Why? We should have seen at least a draft. The Under-Secretary of State for Scotland seems quite happy, so I presume the agreement has his approval. I ask the Parliamentary Secretary to try to tell us about it.
I take it that when the agreement does come before us eventually we shall be able to pray against it but that is not a satisfactory way of securing a debate on it, and it would only be a brief debate. Tonight is the time to do it. Parliament ought not to be limited in this way. We should have a fair opportunity of knowing the basis of the agreement, considering that a great deal of the taxpayers' money is at stake.
If we are deliberately, and with good will, allocating £10 million of public money to this project—which I believe will help revive the Highlands—it should be tied to that project and not to other assets of Wiggins, Teape. If we are to have no representation on the board however, we could not be sure of this. The agreement may protect us, but if the hon. Gentleman says that then he is contradicting what he said earlier—that it would be difficult to extricate the various accountancies of the. various holdings of the parent company. There should be separate accountancy for each project. As he must know, that happens in much bigger companies than Wiggins, Teape. If this is so, why not have separate book-keeping and accountancy for the Fort William project alone? We could then give it all the help we want and ensure its success, without a nagging fear that it may be pulled down because of inefficiency in other projects with which we have no connection and of which we have no knowledge.

11.30 p.m.

Mr. D. Price: The most convincing argument in favour of the way we suggest to the Committee that the project should be financed was put by the hon. Member for Westhoughton (Mr. J. T. Price), who went a great deal further than I or any member of the Government would go in suggesting that, at least in the early years, the project might not be all that profitable. We have no intention that this should be a groundnut scheme. The hon. Gentleman gave a good cautionary tale to show, in terms of protecting the public purse, why it is right that the project should be financed as we propose, namely, at fixed interest and with a prior charge in the nature of a debenture on the assets.

Mr. J. T. Price: I know that the hon. Gentleman wants to be fair, and he usually is in debate, but he must remember that, when I gave, quite voluntarily, that comparison with the groundnut scheme, I had not forgotten that, just as the British Government planted the trees and plants which were to produce the crops out in Africa, so the British Government have planted the State forests in the Highlands of Scotland on which this factory will draw. This is germane to the issue.

Mr. D. Price: I do not think that that in any way alters the argument. If there were not the Fort William project, there would still be the problem of selling the trees which are already planted and which have already been financed. Indeed, in many ways, this project is of very great benefit to the State forests because it will make it very much easier to sell not only the timber required for the construction industry but the thinnings and so on. The hon. Gentleman asked me to be fair to him. He must be fair to us. His intervention was irrelevant to the general question.
The hon. Member for Glasgow, Craig-ton (Mr. Millan) asked me a direct question: did the Government consider other ways? Of course, we looked into all the permutations. There are many variations. But the Government came to the view that, in these circumstances, this was the most appropriate way of doing it.
I recognise the difficulty of hon. Members in the Committee tonight.

Obviously, it would be very much easier if we had the agreement before us. But the agreement has to be negotiated in detail, and my Department is not in a position to enter into negotiations until we get the authority of Parliament through the Bill. It would be out of order if I went further and discussed what is in Clause 1(4), but the hon. Member for Central Ayrshire (Mr. Manuel) made a passing reference to it, so that point is before the Committee. It is hoped that, if we get the Bill through all its stages in both Houses in reasonable time, the agreement will be available for the House before the Summer Recess.

Mr. Ross: The agreement, of course, is all-important, and it is tied to this subsection because our decision will affect repayment, and repayment is covered by the agreement. The agreement is to be referred to both Houses of Parliament. There are three different ways in which such an agreement can be laid. It can just be laid on the Table and no more. One can ask for it, read it and inwardly digest it, and do nothing about it. A Question could be put to the Secretary of State, and, if we were lucky, the present position is such that we would have one opportunity for an answer before the Summer Recess, and the chances are that anyway, if it was the Secretary of State who was answering, the answer would not be very satisfactory. The second way is by moving a Prayer. The third way is by the Government bringing the agreement before the House for its approval.
All that is provided in the Bill is that the agreement shall be laid before both Houses, and I fancy, by the smile on the Parliamentary Secretary's face, that if he gets the Bill tonight, he will have no trouble with the agreement because it will not be debated. If he likes, he can be generous and say that the Committee has shown tremendous interest in the agreement and that he will therefore take steps to ensure that it is laid before the House for approval.
I probably misled the Committee when I spoke about the Highlands and Islands Shipping Act. We discussed that as an Act, but we did not then discuss the agreement although we later had a full-scale debate on it. We had a similar debate about a month ago when we had to provide £10,000 to finance a couple of


wee ships for the south islands of Orkney. According to the terms of the Act, a draft agreement had to be produced for approval and the House debated it, and we even had the attention of the Liberal Party which, for some reason, does not seem very interested in the Highlands of Scotland tonight.
The point is that for £10,000—and this applies to MacBraynes if £10,000 has to be advanced in any one year-a draft agreement has to be produced and the Secretary of State for Scotland—or, more likely, one of his Under-Secretarys—has to satisfy us about the agreement. The agreement is about four times the size of this Bill and includes things like the stipulation that labour shall be employed according to trade union conditions, the payment of directors, and so forth.
We are not asking for anything new. The case of British Petroleum in 1912 has been mentioned. There was even a question of a new company being set up when we nationalised the shipping services in the north islands of Orkney. The first Measure passed after the last election, which was fought by hon. Gentlemen opposite on "No more nationalisation", was a nationalisation Measure. The Secretary of State formed a new company and he appointed the directors.
It is probably right to say that real stake is the £1·3 million to cover accrued interest before 1st January, 1967, but we are making a loan of up to £10 million. There is more in this, however, than just getting our money back. If there were any danger of our not getting our money back Wiggins, Teape & Co. would never have ventured upon this enterprise. The Parliamentary Secretary himself said on Second Reading that the long-term commercial prospects were good.
I hope that they are, for we have far more at stake than just £10 million. We have generations of investment in forestry, both public and private. We have investment in the power to be used for the construction of this enterprise and even in the railways services.

The Deputy-Chairman: The hon. Member for Kilmarnock (Mr. Ross) is going a bit far. I have been fairly lenient on the question of participation, but I think that the hon. Member is going too far now.

Mr. Ross: I was saying, Sir Robert, that I was not unwilling to stake the money. I was pointing out that the fact that we have already staked a very much greater sum and the fact that Dr. Beeching has said that the railway will be kept open for another twenty years despite the amount of money which may be lost show what we are prepared to stake to get this industry started. The Amendment should be accepted. After all—and despite the complexities—nothing ham been so finalised that the Government could not wait a few weeks longer and reconsider and negotiate this admittedly complex matter with the company.
Had we waited just a couple of days longer we might have known a little more about Wiggins, Teape & Co. Ltd. Its annual statement is expected to be published in two days' time and we could have seen how things have been going for the company during the past year. The timing in bringing forward the Bill tonight, is, shall we say, convenient? There is not a lot between us. We are merely asking the Government to do something that is by no mean revolutionary.
If the Government are confident of the success of this venture they should be prepared to put this matter forward in their negotiations with the company. It must be remembered that Wiggins, Teape & Co. Ltd. has been aware of the possibilities of Highland timber for a long time. In an excellent document produced by the company hon. Members are told that four or five years ago it first made a approaches on this subject.
I suppose, from what has been said by hon. Gentlemen opposite, that my hon. Friends and I are not going to get far with our suggestion tonight. I regret this because, as we have one of the newer and younger hon. Members opposite in charge of the Bill, I thought that we might have got some forward thinking. The Government must realise, after all, that they are not the first organisation with whom Wiggins, Teape & Co. Ltd. has joined forces. The company has all sorts of agreements, including one for photographic paper with British-American Tobacco Company Ltd. What would be wrong with the British Government sharing an interest in something which is costing them, or the taxpayer, about


£12 million a year-the Forestry Commission? Had we had some participation we might have ensured that there were safeguards for the user on the subject of prices. Hon. Members opposite are often concerned on this aspect.
I hope that the Government will think again about this. Scotland's stake in this matter is extremely high. As my hon. Friend the Member for Central Ayrshire (Mr. Manuel) pointed out, local authorities in Scotland are to spend a great deal of money in connection with the Bill. An Answer I received from the Secretary of State last week showed that they plan to spend £2½ million on providing services for the mill. Inverness County Council will get 64 per cent. of its rate-borne expenditure paid by Exchequer equalisation grant. That is apart, of course, from the housing subsidies which, I presume, will be paid in respect of houses built by Inverness and Fort William Councils.
I hope that hon. Members opposite are not thinking that we are being doctrinaire about this. The community concerned will be dependent on this private enterprise plan which has been applauded, supported and approved by everyone. I am sure that nothing in any agreement will cover the possibility of shut-down and withdrawal. The worst argument the Government could have used was to say, "In the early years there might not be a profit." It might happen that in those early years the Government will not have advanced all of the £10 million, because the first stage does not start until 1965. What will happen in the early, unprofitable years if it is decided to shut down the plant? That is another important reason why the Government should participate in this venture; and I do not, of course, mean the day-to-day running of the company.
11.45 p.m.
Because we want this project so much and approve so much of it, we shall not vote on this issue tonight. But we do not want the matter to go by default if we permit the Amendment to be nega-

tived. I hope that the hon. Member will not take a negative attitude towards it or take it that he need do no more thinking along these lines. He still has time to think about it. After two days. after we hear about the bright sunshine of Wiggins, Teape & Co. and all their fifty-five various enterprises, we might learn that they are prepared to join the British Government in partnership.

Mr. Jay: The Parliamentary Secretary might answer the precise question whether the agreement. when it comes before the House, will be something against which the House can pray.

Mr. D. Price: I understand that it is not necessary for this to have an affirmative Resolution, but it is an issue on which the House can ask Questions. It can be debated on the Board of Trade Vote and, of course, on the Adjournment.

Amendment negatived.

Clause ordered to stand part of the Bill.

Bill reported, without Amendment; not amended (in the Standing Committee), considered; read the Third time and passed.

Orders of the Day — PUBLIC LAVATORIES (TURNSTILES) [MONEY]

[Queen' s Recommendation signified]

Considered in Committee under Standing Order No. 84 (Money Committees).

[Sir ROBERT GRIMSTON in the Chair]

Resolved,
That, for the purposes of any Act of this Session to make it the duty of local authorities to abolish turnstiles in public lavatories and sanitary conveniences, it is expedient to authorise the payment out of moneys provided by Parliament of any increase attributable to the said Act in the sums payable by way of Rate-deficiency Grant or Exchequer Equalisation Grant under the enactments relating to local government in England and Wales or in Scotland. —[Sir K. Joseph.]

Resolution to be reported.

Report to be received Tomorrow.

Orders of the Day — LOCAL GOVERNMENT BOUNDARY COMMISSION (SOUTH WESTERN REVIEW AREA)

Motion made, and Question proposed, That this House do now adjourn.-[Mr. Chichester-Clark.]

11.48 p.m.

Sir Edwin Leather: In the short time available I should like to raise the principles of the Local Government Boundary Commission, in particular in relation to Report No. 4 on the South-Western General Review Area, on which the Minister and I have had many discussions. I thoroughly understand my right hon. Friend's problems and difficulties and that, officially this Report has not been sent to him. I should like to tell him how very much I appreciate the great courtesy he has done me in taking this debate tonight himself. I am sure that my many hon. Friends who feel strongly about this topic have nothing but sympathy for my right hon. Friend in his problems, and the most immense personal good will towards him.
On a suitable occasion I am prepared to argue that this Report on the southwestern area is bad and wrong in detail and in argument in every singular particular, but tonight I am concerned only with the principle involved. In a debate on my right hon. Friend's Department last week, he referred to the unpleasant situation in which he was placed in taking difficult decisions, and the courage it took to face up to them. I tell him quite frankly that I yield to no one in my admiration of his courage in those matters. When he has had to take difficult decisions on principle I have always supported him, however unpopular they might be. I have been, and am, happy to do so.
In that debate last week reference was made to the London Government Bill and to what my right hon. Friend had to do with it, but there is no parallel between the situation in my county, and in my hon. Friends' counties, with what happens in London. I am not a London Member, and would not like to judge that issue, but, as I understand, both the people and the authorities concerned were all agreed that something had to be done, but bitterly differed on

what should be done. My right hon. Friend therefore had an appalling decision to make. In the cases in Somerset with which I am concerned, both the people and the public authorities are united in feeling that nothing need be done, and are unanimous in opposing the proposals in this iniquitous Report.
The Minister may tell me that the Council of the City of Bath would not agree with that statement, but not one citizen in Bath is affected by these proposals. Whether or not the proposals are accepted, not one person in Bath will be affected; the lives of the people there will continue in exactly the same way. Their institutions, local government organisations and traditions will go on regardless of what happens to these proposals. But it is not unfair to say that there is no enthusiasm whatsoever in Bath for them, and that many of the people there, including many prominent members of the council, are actively opposed to them.
I hope that my right hon. Friend is absolutely clear that the 10,000 or more people whose lives are intimately affected by these proposals live in Somerset. The proposals in the Commission's Report would tear up whole villages by the roots. There are two closely-knit communities, in one of which I have lived for many years, which would not just disappear—it is proposed to split them three ways, Historic parishes would be abolished completely. A perfectly satisfactory rural district council, against which not a single complaint has been made, would be emasculated.
If my right hon. Friend studies the Report, he will find that the Commission could not find one person or authority involved to support the proposals that it has had what I must, with the very greatest respect, call the effrontery to put forward. The Commission could not produce one witness to complain of existing arrangements. It knows that there has been a democratically held referendum in which over 90 per cent. of the population voted against the proposals; that every village meeting has been unamiously against them; that the county council and the rural district councils are unanimous.
I therefore say that if my right hon. Friend were to accept these proposals it


would not be a Solomon's judgment, such as he had to take in the London case, but a clear-cut decision for the officials and against the people. It would be a positive act of contempt for public opinion, and contempt for the most fundamental rights of the people of my county—and for what principle?
If my right hon. Friend says that he is prepared to take unpopular decisions in the interests of principle, I support him. I do not think that my record in the House has been that I have run away from unpopular decisions. The principle involved in this Report, in which my right hon. Friend is asked by the Commission to do this, is quite clear. It is for administrative convenience—that and nothing more, Furthermore, I would point out to my right hon. Friend that the Commission has not produced a single shred of evidence, not one witness, and not one statement in the Report to support the contention that present arrangements are in any way administratively inconvenient. The Commission knows perfectly well that it is the unanimous opinion of those of us who have to live under these arrangements that its proposals would be administratively a great deal more inconvenient than those we have to deal with at the moment.
I would refer my right hon. Friend to one short extract from the excellent report put before him by the Somerset County Council on this question of administrative convenience, about which the Commission is asking him to take a stand and go to the stake. At present, the County Borough of Bath has a common boundary with one county and one district council. If my right hon. Friend accepts the proposals in this Report it will have boundaries with three counties and four or five district councils, depending on how much chaos is left in the remainder of the county. At present, it has to deal with one planning authority on its environs. If the right hon. Gentleman accepts these proposals it will have to deal with no fewer than four authorities. This, these people have the temerity to call administrative convenience.
I say with all the sincerity that I can command that I do not conceive how any Conservative Minister could accept

these proposals without betraying the most fundamental principles of our party. This Commission has gone far beyond anything ever visualised by those of us who were in the House when we debated the Local Government Act, 1958. I would far rather leave this party than betray the principles for which we have fought and worked for so many years and I therefore implore my right hon. Friend to think very seriously before he places many of us in that intolerable position.

11.57 p.m.

Sir Harry Legge-Bourke: I do not wish to queer the pitch of my hon. Friend the Member for Somerset, North (Sir E. Leather) by trying to plead the exact case that one day I shall perhaps have to put for my constituents, but there is so much in common between the general basis of what he has said and what my constituents in the Isle of Ely feel about the Boundary Commission's Report that dealt with the Soke of Peterborough, Huntingdonshire, Cambridge, and the Isle of Ely that I feel I can well support my hon. Friend almost without any exception whatsoever.
I think that it was Lord Melbourne who said:
Pray, Sir, have the goodness to leave things alone.
His words might well be re-echoed tonight. The county of the Isle of Ely, the separate county administration, is coincidental in its boundaries with my constituency of the Isle of Ely and I have not found anyone who is in favour of the recommendations to amalgamate the Isle of Ely with any of its neighbours.
The one thing which I resent bitterly is what I might almost describe as blackmail by the Commission during its inquiry to try to persuade representatives from the local authorities to say what, if they could not get all they wanted they would then like, and to ask whether they would prefer to become part of four counties amalgamated into one county, or of one county joined with only one other, thus begging the much bigger question whether there should be any changes at all.
One of the things that disturbed me above all about the work of the Commission was what one member said to me when I went to see the Commission about its work. "Having been set up", I was


told, "we must recommend something, after all. We cannot just recommend the status quo." That seems to be the negation of justice. If that be the doctrine upon which the Commission is working, I do not believe it is fulfilling what Parliament intended, When we debated local government reform some years ago I am certain that none of us visualised that any report made by the Commission would be made because it felt that it had to recommend some changes. I am sure that we felt it would do its job fairly and dispassionately, and that if it felt things should be left as they were it would say so. It should not feel under an obligation to recommend changes merely for the sake of change, and certainly should not make changes purely for the sake of bureaucratic convenience.
The important thing is that there should he real unity between the electorate and local government, just as there should be between the electorate and the central Government, and it seems to me that the Boundary Commission is getting off the rails in some of its recommendations. I think that the fact that a number of us are prepared to wait till after midnight to raise this important matter is some indication of the importance that we attach to it.

12.1 a.m.

Mr. J. C. Jennings: It appears to be the official view that smallness connotes inefficiency. Naturally, I repudiate that implication.
I have three specific cases in mind in connection with this debate. One is the County of Rutland, another is the County Borough of Burton-upon-Trent, and the third is the Rural District Council of Tutbury, in my own constituency. Surely we on the Conservative side of the House take some notice of tradition and history. We should not be ashamed of it. To condemn any authority, such as any of those that I have mentioned, to a change of status merely because they are small is flying in the face of tradition. We are proud of our tradition in the Tory Party, and we should not be afraid to face it.
It is over a year since we had a public inquiry into the position of local authorities in my constituency, and we are still awaiting the decision of the Minister on these matters, particularly with regard to Burton-upon-Trent and Tutbury

rural district. I shall be grateful if either tonight or within the near future he will indicate when a decision is likely. I implore him to look at these matters, from the point of view not merely of size, but of efficiency.

12.3 a.m.

Mr. Robert Cooke: No doubt, the Boundary Commission proceeds according to well-defined rules, but very often rules do not fit with people. I have had the privilege of knowing all my life these villages and communities to which my hon. Friend the Member for Somerset, North (Sir E. Leather) alluded. Although he came from another land to sit in this House, his roots are deep in Somerset. I have done some research in the county and I have found a number of people, whose name I had perhaps better not mention, but it is very similar to my hon. Friend's name. I know the sincerity with which he feels for the difficulties faced by his constituents.
We have been told that there may be doubt as between the views of the local authority and the views held by the people concerned. Surely, if there is any doubt, the benefit of that doubt should be given to, the people concerned. They should have their way. We are told that the proposal is made on the grounds of administrative convenience. That smacks of the small-minded men who administer so many of our local authorities. These people, whose families have lived in the area for hundreds of years, should not be disturbed.
I represent a great city which has more than enough to administer and does not desire to take a bite out of the countryside in any direction, although changes have been forced on us. Although am not so well acquainted with Bath as I am with Bristol, I am sure that there are many people in Bath who would not like to see the bite into the countryside which is proposed. I hope that my hon. Friend's constituents will long remain part of the countryside and will not be condemned to being part of a nameless suburbia.

12.5 a.m.

Mr. John Farr: I am much obliged to my hon. Friend the Member for Somerset, North (Sir E. Leather) for giving us the opportunity to discuss the Local Government Boundary


Commission, short though the time is. I will not join in a wholesale condemnation of the Commission because I have had the opportunity of seeing it at work and of studying what it has done in Leicestershire.
I would rather say that it is somewhat like the curate's egg, good in parts. The Commission is good because of the meticulous and painstaking care which it devotes to ascertaining accurately the views of everybody who can possibly be concerned with its proposals. In Leicestershire, the Commission held inquiries lasting over many days, so that everybody had the opportunity of really letting the Commission know what he or she felt.
That is a good part of its work and I therefore say that one could almost point to the Commission and say, "There is democracy at work". But the curate's egg was also bad in parts and it is bad that the Commission, having so accurately and with such great care and attention digested the views and opinions of those people affected by its proposals, should find that as often as not there is produced an answer entirely at variance with the views of those who have made known their views.
In this House, if 200 hon. Members voted in the Aye Lobby and 100 in the No Lobby, the Ayes would have it; but if 100 people go into the "No Lobby" of the Boundary Commission and 5,000 into the "Aye Lobby", as likely as not the Noes will have it. It is difficult to ascertain how the Commission produces some of its answers.
However, we in Leicestershire are confident that when the Minister comes to make his Order for the East Midlands Review Area, which has almost completed its gambit of activity, he will pay due and proper attention to the views expressed by the people. They have requested that the proposals made by the Commission be rejected out of hand. I know that the Minister does not court unpopularity willingly. We have seen that fact in the stand he has taken over rates in the matter of the rating of properties up to present-day values, but it is almost stimulating to be unpopular and, at the same time, to be right. It is the very devil to be unpopular and to be in the wrong.
I know that the Minister is anxious to reply, but I would like to leave him with one suggestion which has been put to me during recent months by town planning experts. It is that, somehow or other, city authorities must be prodded into expanding vertically rather than laterally all the time. It is not good enough that they should be able to say they want a few more hundred acres of Somerset, or Leicestershire, or the Isle of Ely, and be able to get away with it. They are not being encouraged sufficiently to curtail their lateral activities. A little bit of stimulus from the Minister might encourage them to make their future developments in a vertical manner much more than they have done in recent years.

12.10 a.m.

The Minister of Housing and Local Government and Minister for Welsh Affairs (Sir Keith Joseph): Anyone who asserts that local government enjoys no allegiance in this country ought to come here at five minutes past midnight and hear three or four of my hon. Friends using at times almost un-parliamentary language in their defence of, and loyalty to, local government; and I respect their attitude
I thank my hon. Friend the Member for Somerset, North (Sir E. Leather) for his personal courtesy towards me, though I shall have something to say about his attitude to the Commissioners in a moment. Perhaps I should say straightaway that in the case of the Report on which he feels so strongly, namely, the Final Report of the Local Government Commission for England on the South-West General Review Area, I had better put it on record that before I or the Government address ourselves to the merits of the proposals made there has to be, under the procedure laid down by the 1958 Act, a public inquiry at which all and any objections to the proposals can be ventilated, and the Report has to be put to me. It is only when I have that Report that I am in duty bound to prepare with my Government colleagues recommendations to put to the House. So the decision-making stage in the South-West has not yet arrived, and there will be ample opportunities for my hon. Friend's constituents to make their views known.
My hon. Friend the Member for the Isle of Ely (Sir H. Legge-Bourke) pro-


duced an extremely effective quotation. He said, in the words of Lord Melbourne: "Pray have the goodness to leave things alone."
But, of course, things have not been left alone. Wherever we look things have changed. They have changed, in most cases, all over the country. Population has changed; the distribution of population has changed; the location of industry has changed; the scope and the method of communications has changed; the scope of local and central government has changed; and the relations between central and local government have changed; and at least the scope of local government and the relationship between central and local government have changed in all places even if, in some places, the population has not changed all that much.
Surely, then, it makes sense that the Government should have a policy, as they do, for reviewing the local government structure of this country as a whole in order to modernise and improve it. That is the objective, and it is an objective which, in principle, my hon. Friends willingly supported in 1958. As part of the procedure, Commissioners were appointed. My hon. Friends do not need to put them in the category of officials and seek to invest the honourable word "official" with a pejorative bias. These people are independent Commissioners, appointed by Her Majesty. They are men and women of integrity, independence, experience and distinction. They have been given a job by us in Parliament, and the case of my hon. Friends surely does not depend in any way upon depreciating the work these people have done in carrying out a most invidious task. I was grateful to my hon. Friend the Member for Harborough (Mr. Farr) for his words of appreciation. Surely the right thing to do is to wait till the Government formulate their recommendations to Parliament and abuse us if we make a recommendation—whether based on the Report or not—with which my hon. Friends disagree.
The criteria which the Commissioners have worked to are laid down in the regulations of 1958. My hon. Friends will know very well from their study of these criteria that there is a number of factors which the Commissioners are required to have in mind. Of these,

local opinion is one and an immensely important factor, but it is not the only one. Nor do I think my hon. Friends can possibly maintain that local opinion, in the context which I have described, could be the only single factor in this context on its own. If so, they could not have agreed to pass the 1958 Act.

Mr. Farr: Would my right hon. Friend say that local opinion is possibly the most important of the factors to be considered?

Sir K. Joseph: My predecessor said that it was an immensely important factor, and that I gladly repeat. But it does not lie on me, who am bound to obey the Statute, to pick out one factor and say without qualification that it is the most important. It is immensely important, and I certainly do not wish to invite the odium of going against local public opinion without having the strongest reasons. I am not addressing myself to the merits of any particular case, and 1 am not entitled to.
Perhaps my hon. Friends will bear in mind the contents of Paragraph 11(c) of the regulations, which refers to the important factor of the balance of advantage brought about by any change. This is a further very important protection for local opinion laid upon the Commissioners and the Government.
My hon. Friend for Burton (Mr. Jennings) asked me to comment on size in relation to the general objective of improvement and modernisation of local government. Here, I must rest on the words of the law, namely, that the purpose of the Commission is to achieve "effective and convenient" local government. My hon. Friends the Members for Bristol, West (Mr. Robert Cooke) and Somerset, North were wrong in referring to "efficient local government" or "efficient administration". The combination is "effective and convenient". These are the words which take into account both local opinion and the factors of general convenience and effectiveness.
I cannot give a categorical assurance that in no part of the country, under any circumstances, will local opinion be upset. In the nature re of things it is impossible to carry out such a review without up-


setting some local opinion. But I take the point inherent in what my hon. Friends have said—that there is a distinction between the throbbing, pulsating problems of the conurbations, where something desperately has to be done if traffic, homes, planning and services are to be carried out, and the more leisurely, less immediate, though important, problems of the countryside. I readily grant that.
It is, in the nature of things, a matter of degree. In the cities, change must take place if the public is to be served. In the country, change must take place in order to bring the structure of local government up to date in accordance with the regulations and by the procedure which I must carry out under the Act.
What we are trying to do—and my hon. Friends have thrown at me Conservative principles—is to carry out the perennial task, the hardest task in government, of reconciling tradition, history, public opinion and effective service to the citizen. It is a very hard task. In pursuing it, I want to avoid odium, but I hope that I have my hon. Friends' support in seeking this reconciliation in the light of the extremely conscientious efforts of the Local Government Commission, obviously reserving the discretion of the Government before making final recommendation to the House in any particular case.

Question put and agreed to.

Adjourned accordingly at eighteen minutes past Twelve o'clock.